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DOJ targets PE rollups; Sun Capital’s healthcare strategy; Blackstone’s science experiment

TJC CEO offers young people PE career advice.

Happy Friday, Hubsters. MK Flynn here with today’s Wire.

Antitrust alert. The SEC isn’t the only government agency intensifying its scrutiny of the private equity industry. The DOJ is taking a closer look at PE-backed deals too.

“Sometimes [the motive of a private equity firm is] designed to hollow out or roll up an industry and essentially cash out,” Jonathan Kanter, head of the DOJ’s antitrust unit said in an interview with the Financial Times. “That business model is often very much at odds with the law and very much at odds with the competition we’re trying to protect.”
A fuller assessment of buyout groups is “top of mind for me, and . . . for the team,” Kanter warned.

In addition to rollups, the DOJ will be looking into “interlocking directorates,” in which executives from a PE firm serve on boards of competing companies, which may violate a section of the 1914 Clayton Antitrust Act, Kanter said, adding: “We’re going to enforce that.”

I’d love to know your thoughts on this. Will the DOJ’s stance stymie any deals you’re working on? Send email to me at mk.flynn@peimedia.com.

Energy transition. Earlier in May, Blackstone announced its investment in Geosyntec Consultants, an environmental engineering and design consulting firm. Geosyntec offers technical expertise in energy transition, water quality and supply, coastal, infrastructure and environmental restoration. PE Hub’s Obey Martin Manayiti caught up with Blackstone Energy Partners global head David Foley and managing director Darius Sepassi to learn more about the deal and how the private equity firm is planning to deploy Geosyntec’s expertise in the energy transition space.

With a team of more than 1,700 engineers, scientists, and other technical personnel, Geosyntec operates from more than 90 offices across the US, Canada, Europe, Australia, and the Middle East.

“We were drawn to Geosyntec, because it is considered one of the strongest providers of specialized environmental engineering services, which is a reputation that the company has built by focusing on technical excellence and by promoting an employee-ownership culture,” Sepassi said.

With this expertise, Sepassi said the firm saw an opportunity for Geosyntec to work with Blackstone’s broader portfolio across real estate, infrastructure and other private equity funds, “all of which have expansive footprints and large asset bases that we can potentially cross-sell into.”

Geosyntec will grow organically by expanding its footprint across the world by recruiting and retaining world-class scientists and engineers, which Sepassi described as the life blood of the company.

“Science recognizes and appreciates other science,” he noted.

Check out the whole story here.

Healthcare consumers rule. “In today’s healthcare world, whether it’s dermatology, dental, or primary care, you have to provide a very strong patient experience, which is now more of a consumer experience – clean and up-to-date waiting areas, minimal wait times, a good relationship with the provider and appropriate follow-up,” Daniel Florian, managing director, Sun Capital Partners, told PE Hub’s Aaron Weitzman. “We want people coming into our dermatology practice to have a similar experience they would have at an Apple Store – efficient, clean, and cutting edge.”

Aaron profiled Sun Capital as part of our ongoing series on private equity firms investing in healthcare.

“We’ve been around for over 26 years, and we started doing distressed investments but over the last decade, however, we have pivoted to buying healthier businesses,” Florian said. “We focus on ‘good to great’ businesses where we can partner with management to help them accelerate value creation through operational excellence.”

The firm’s experience in distressed assets helps it see value where others don’t. This was the case with ClearChoice Dental Implant Centers, which Sun sold to Aspen Dental Management (backed by investors that include Ares Management, Leonard Green & Partners and American Securities) for a reported $1.1 billion in 2020.

“We knew where there was value, while others might have been hesitant, because it was losing money two years before we bought it, but we doubled its footprint and earnings and sold it last year,” he said. “That is the kind of deal we can do that others might pass on.”
For more on Sun Capital’s healthcare strategy, read the full story.

Weekend reading. Buyouts’ Off-duty provides a snapshot of top investors, including a few details about what they do when not chasing deals. Chris Witkowsky caught up with Rich Caputo, CEO of The Jordan Company.

Caputo joined the firm in 1990, prior to which he worked in high-yield at Prudential-Bache. TJC is one of the oldest PE firms in the business, having started as a private investment partnership in 1982. It raised its first institutional capital in 1986 and its Fund I in 2002. In 2012, Caputo became co-CEO alongside founder Jay Jordan, who retired in 2016.

What advice would you give a young person interested in a PE career?
“When looking for a job in PE do not obsess about a firm’s brand or AUM,” Caputo said. “Find a firm with good people, low turnover and a growth mindset, where you can see yourself ultimately making an impact and having a long-term career. And don’t be afraid to take a little risk for that type of opportunity.”

To find out more, including Caputo’s favorite musician (also a favorite of mine), read the whole interview.

On that note, here’s wishing you a great weekend. If you’re in the Northeast, look out for a heat wave. Make sure your AC is working!

All the best,

MK