Good morning, dealmakers! This is Aaron Weitzman substituting for Chris Witkowsky for Wire Wednesday.
I hope you weren’t up too late watching the midterm election returns. Looks like it will be a while before we know which party controls Congress.
Back on firmer ground, PE Hub is taking a close look at a number of private equity deals today, starting with software and services aimed at helping companies handle supply chain issues.
Supply chain. As companies are still smarting from the stress of the snarled supply chain, modernizing the way they move goods by embracing technology can help them increase efficiency, transparency, and resilience according to Eric Ahlgren, managing partner at BV Investment Partners.
Obey Martin Manayiti spoke with Ahlgren about the Boston-based BV’s formation of a new platform company called ArchLynk, which aims to help companies manage their supply chains using business software from SAP.
ArchLynk, which expects to leverage artificial intelligence and machine learning, will be led by Sekhar Puli, the co-founder of REAN Cloud, a former BV portfolio company sold to Hitachi Vantara.
Hit by multiple supply chain disruptions during the pandemic, companies are now seeking ways to increase efficiency, Ahlgren explained.
“What makes this an interesting opportunity is that global companies have learned some pretty hard lessons over the last couple of years, and the investments that they are going to make going forward to modernize their supply chain will make them more resilient and more transparent and enable them to be more nimble and not make the same kinds of mistakes [again],” Ahlgren said.
“The growth drivers underpinning our thesis include the onshoring and reshoring of supply chains, disruptions resulting from covid and the war in Ukraine, which are increasing supply chain complexity and driving demand for better resiliency, and elevated ESG standards that are driving demand for better supply chain transparency,” explained Ahlgren.
Expansion. Vision Integrated Partners, a managed services organization that provides non-medical services to its network of eyecare professionals that is backed by Firmament, announced three partnerships that allows VIP to expand into the Kansas City market. This is a majority investment, but the terms of the deal were not disclosed.
VIP has agreed to terms with Heart of America Eye Care, Mid-America Eye Center and Physician’s Surgery Center. With the additions, VIP now includes 48 physicians, 19 locations and five ambulatory surgery centers. VIP first entered Kansas City in November 2021 through its partnership with Discover Vision Centers.
The partnerships highlight Firmament’s interest in the ophthalmology sector, and builds on the firms’ strategy of partnering with premier physician groups in the Midwest, Southeast and West Coast.
“The VIP management team continues to do an outstanding job of building the company into a leading provider of high-quality ophthalmology services,” said Parris Boyd, partner at Firmament. “We’re proud of the strategic, focused growth they’ve achieved in each of their target geographies.”
If you have recently done any physician rollups, please reach out to me at email@example.com as I would love to discuss. Perhaps my next deal roundup will be on this topic.
And while we are on the subject on Firmament, I profiled the New York based firm and I spoke to Boyd earlier this year about various topics, including rising interest rates, returns, debt-to-equity ratios, exit opportunities and the role of Amazon and UnitedHealthcare as dealmakers.
“Our debt-to-equity ratio really hasn’t changed that much, despite the rise in interest rates, because we’re not aggressive on leverage,” explained Boyd. “For us, it’s about what levers we can pull post-closing, instead of financial engineering through high leverage. An increase in interest rates when you have conservative leverage is not really going to move the needle on the company’s cash flow coverage. We usually have somewhere between 1.5x and 2x interest coverage for most of our deals.”
When it comes to healthcare investing, the firm is seeking opportunities that cut costs and fix labor shortages.
“Our current investment themes are primarily focused on businesses that eliminate costs from the healthcare system and the labor shortage that exists in several areas,” said Boyd. “This would include businesses that are moving surgical procedures and other services from higher-cost settings, such as hospitals, to lower-cost environments, such as ambulatory surgery centers. Two segments that come to mind are orthopedics, with certain hip and knee replacement surgeries recently being approved by Centers for Medicare and Medicaid Services to be performed at an outpatient ambulatory surgery center, and skilled home health. We are also spending time on investment opportunities that focus on value-based care.”
Diversity in venture capital. Narrowing the gap between women and men in the venture capital industry requires not only more education for all VC investors but also standardized data transparency to level the playing field when gauging track records, writes Venture Capital Journal’s David Bogoslaw.
That was one of the issues that Columbia Business School professor Angela Lee discussed in a recent conversation with VCJ.
“There are lots of ways to demonstrate track record. The better you are at self-promotion, the better you are at being able to sell your track record,” Lee said. “Because there’s no standardization [of data], it involves the ability to do self-promotion. There is a gender correlation with who does more self-promotion.”
This week, Lee is leading an intensive four-hour course for about 50 female investors at the third annual Glaring Gap Summit in Tampa Bay, Florida. Lee’s course consists of the highlights of the eight-week in-person and two-day online boot camps offered each year by 37 Angels, a network of female angel investors she founded in 2015.
“We’re trying to close the diversity gap around start-up investing,” she said. “People take this [course] to get into venture capital, to become angel investors, because 93 percent of VCs are white men.”
That’s it for today.
MK Flynn will be writing to you tomorrow, and I will of course be back with you all to end the week. I am also excited to announce that starting next week, I will be writing to you on Thursdays and Fridays for the rest of the year – so I hope everyone is as excited as I am for a double-dose of double A.