FFL eyes proprietary opportunities in healthcare; plus healthcare deals led by HGGC and others

PE makes a bet on the mental health space.

Happy Fri-yay, Hubsters! Aaron here to end the week.

Today we have a healthcare-focused edition of the Wire. To kick things off, FFL shares insights on dealmaking in the sector.

Then, we’re going to round up some healthcare deals that came through this week from HGGC, Avesi, Thurston, NMS and Centre Partners. The deals feature mental health, dental practices and clinical trials.

Finally, we’ve got a look at people moves being made by Devon Park.

Healthcare heartbeat. Continuing with PE Hub and PE Hub Europe’s outlook series, we have some fresh thoughts from Karen Winterhof, a partner at FFL Partners.

Here’s an excerpt from our Q&A:
How do you expect the first six months of PE dealmaking in 2023 to compare with the last six months of 2022?

It feels like banker-driven deal flow will likely remain slower for the next few months, but we are still seeing interesting companies in our pipeline, including some proprietary opportunities coming out of our Sector Exploration and Expertise Development process.
We have seen some direct lenders become more active on the new deal front compared to Q4 2022, but we still need to see more supportive credit markets for deal volumes to pick up meaningfully.

What will be the most important trends affecting your healthcare dealmaking in 2023?
Stable and growing demand is a key part of our investment theses across healthcare services and pharma services. Given the environment, we’ll be scrutinizing demand outlook even more this year. We are growth-oriented investors, so we focus on investing in subsectors with secular tailwinds.

A business’s demonstrated ability to improve patient outcomes while helping to take costs out of the system will be key for us. Given where healthcare is evolving, it is critical for our businesses to make the system more cost efficient and at the same time improve the patient experience.

You can read the whole story here.

Mental health. Two deals that interested me this week were in the mental health space.
Avesi Partners invested in Muir Wood, a provider of integrated, adolescent-focused behavioral health services.

“We have been actively searching for an opportunity to support an exceptional team in the adolescent mental health space – a segment with an acute shortage of quality care options,” said Chris Laitala, managing partner, Avesi. “In addition to its impressive management team, Muir Wood’s superior, outcomes-driven service quality, as well as its in-network relationships with commercial payors, made it the ideal platform with which to partner.”

And ARC Health, which is backed by Thurston Group, acquired The Lilac Center, a mental health care provider group.

Formed in 2021, ARC Health is a group of mental healthcare practices. The group has practices, psychiatrists, psychologists, and therapists in Connecticut, Georgia, Michigan, Minnesota, New York, North Carolina, Ohio, Tennessee, Virginia, and Washington, D.C.

The Lilac Center adds Kansas and Missouri.

“The addition of the Lilac Center and their focus on DBT fills a need by providing additional resources and another path for individuals and families suffering with mental illness,” said Vince Morra, ARC Health CEO, referring to dialectical behavioral therapy, a type of cognitive behavioral therapy.

Dental deals. Two other deals that caught my eye this were in the dental space.
I wrote an exclusive earlier in the week about how HGGC made a majority investment in Dentive, a dental services organization founded in 2019.

This is the first outside capital for the company, which provides management services to entrepreneurial, doctor-run general and specialty dental practices, primarily in the western US.

“The doctor ownership model that Dentive has, we’ve had a chance to look at a number of different DSOs and compare and contrast different models, and we think their ownership or equity model is really a compelling model,” said Pat Dugoni, principal, HGGC.

Under HGGC’s model, a partner dentist or practice that’s acquired by Dentive will roll equity to maintain some ownership of the actual practice. Then they also have the opportunity to invest or roll equity into the broader Dentive platform where HGGC has invested.
“We think that’s a model that really nicely aligns the partner dentists’ interests,” he said. “We’ve come to see that type of ownership and equity model is a really important factor for DSOs to attract and retain the best dentists.”

You can read the whole story here.

In another dental deal, Cordental Group, which is backed by NMS Capital, has acquired two practices: Cincinnati-based Rogers Family Dentistry and St.-Lous-based Dr. Allan Link DMD.
Based in Cincinnati, Cordental Group is a dental support organization that provides business support services to affiliated dental practices across the Mid-Atlantic, Midwestern, and Southeastern U.S.

Clinical trial transaction. The IMA Group, which is backed by Centre Partners, has acquired Clinical Trials of America.

The transaction marks the seventh acquisition the IMA Group’s clinical research division has completed since 2018 and the 15th total acquisition for the company in the same period.

The addition of CTA is a natural fit for our organization, expanding our clinical network and adding a large, scalable research business that further differentiates us to sponsors and contract research organizations for fast startup, quick enrollment and high-quality outcomes,” said Dr. Mark Weinberger, president and CEO of The IMA Group. “Our clinical research division has grown more than 300 percent during the past three years. CTA’s integrated physician practice research model and focus on recruiting diverse patients ideally fits with IMA Clinical Research’s vision and growth trajectory.”

People moves. On a different note, one firm the Buyouts team has been watching has been bulking up lately. The advisory shop formed by secondaries veteran Jonathan Costello, called Devon Park, has made a few hires over the past few months.

The shop, which works with GPs on secondaries deals, brought on ex-Whitehorse Liquidity Partners executive Sebastien Siou to focus on GP-leds as well as management company financing transactions. Devon Park hired late last year Ian McLean from Oaktree as a managing director, and Matthew Pellegrino as a director from Committed Advisors.

You can read the whole story here.

That is a wrap for me. I am looking forward to resting and relaxing after a busy week! Wishing everyone a wonderful weekend!

MK Flynn will be with you on Monday, and I’ll be back Tuesday. Until then…

Cheers,

Aaron