Francisco Partners sells pharmacy services provider; Alpine bets big on education

EHP invests in Howard J Chudler & Associates.

Happy Fri-yay, Hubsters! It is Aaron Weitzman coming to you today, a new Friday tradition.

Before I get into business, being a basketball savant, I enjoyed watching game one of the NBA finals last night, but it is a little sad knowing that basketball season will be over soon. However, baseball season is in full swing. Writing this sentence combines three of my first passions and loves; baseball, basketball and writing. The only things missing are food and dogs. Enough about me and onto more serious and important business…

May jobs report. The US economy added 390,000 jobs in May, more than the forecast of 325,000, and the unemployment rate stayed steady at 3.6 percent, compared with an expected 3.5 percent, according to data released by the U.S. Bureau of Labor Statistics this morning.

It is always good when economic indicators beat expectations, but there is clearly still a big supply/demand imbalance when it comes to the labor force, with some industries like healthcare and food service having more issues with retention and burnout.

Healthcare exit. Here’s a recent deal that caught my eye. Yesterday, Francisco Partners said it sold Trellix RX, a pharmacy services provider, to a strategic buyer, CPS Solutions.

FP followed an unusual route for the firm for this asset. In 2016, FP created and launched Trellis to help healthcare systems enter the specialty pharmacy market. The tech-focused firm’s thesis was that patient care, for which prescription drugs are a critical component, was more effective and efficient when integrated within a hospital system.

“At FP, we rarely build a company from the ground up, but when we identified and developed the opportunity to help thousands of patients in the specialty pharmacy market area, we knew we had to get Trellis up and running. Today, Trellis is a leader in the high touch, value-based care market, while also demonstrating an impressive growth story,” said deal partner at FP, Chris Adams.

You may recall that FP won Buyouts’ overall deal of the year for selling Capsule to Royal Philips for $635 million. You can read more about that deal in my award writeup here.

Education. Alpine Investors launched a professional education platform dubbed Axcel. The platform brings together two new portfolio companies: Michael Management Corp (MMC), a provider of training for SAP enterprise software; and Web Age Solutions, an IT training company. Existing portfolio company Interskill Learning, a provider of online mainframe training, will also come under the Axcel umbrella.

“Professional education is being reinvented and reimagined as we speak. Axcel aspires to be at the heart of that reinvention,” said Jonathan Zeidan, an operating partner with Alpine who serves as Axcel’s chief executive, adding that Axcel has the ability and opportunity “to dramatically influence people’s lives through professional education.”

He said the firm is focused on partnering with businesses that offer training programs that support career growth, career advancement and workforce development. This could be learning new skills or sharpening existing ones, Obey Martin Manayiti wrote.

Read the full story.

Margin with mission. Enhanced Healthcare Partners recently made an investment in Howard J Chudler & Associates, a behavioral therapy services provider for people with autism and intellectual and developmental disabilities.
I spoke to Brandon Einstein, a partner at the firm who said that once applied behavior analysis therapy became the gold standard of care with real evidence for making positive changes in the lives of people with autism and other intellectual and developmental disabilities, the firm developed a thesis around that and then “looked for the right platform to take that thesis and build on it.”
They found that “right” investment with HCA.

Part of the growth strategy for this investment will be to focus on connecting the strong demand for these services “with the limited supply of people who can provide the care,” Einstein said. “We want to create a best-in-class place for people to work, become clinicians and learn how to best take care of the adults and kids with autism.”

Read the full story.

Off-duty. Buyouts’ “Off-duty” column provides a snapshot of top investors, including a few details about what they do when not chasing deals. Check out the latest installment by Kirk Falconer, featuring Michael Psaros, who co-founded KPS Capital Partners in 1991.

Here is a snippet from Kirk’s interview:

What PE buzz words or jargon do you hate most?
The only words that matter are “realized, cash-on-cash money multiple.” Everything else is irrelevant.

Professionally, what was your toughest moment?
When our partner Gene [Keilin], now retired, accompanied me on a fundraising meeting more than 25 years ago while being treated for a life-threatening cancer.

Read the full story.

In case you missed it. I want to highlight some of the great work done by the PE Hub staff published recently.

Information services. MK Flynn talked with Nikhil Bhat, partner and co-head, business and technology services at Vestar Capital Partners. Vestar seeks companies that “use technology to aggregate, integrate, and analyze mission-critical data sources to drive high-impact insights for their customers.”
“Data has always been a key input in helping companies make critical business decisions. Over the last 10-15 years, the quantity of available data – about customers, products, markets, supply chains and internal operations – has grown exponentially, while the difficulty of acquiring this data and the cost of computing power to analyze it have shrunk dramatically. Companies who can make sense of this data are able to make better business decisions to drive growth and profitability; but given the sheer volume and complexity of the information, this is not easy,” said Bhat.

Read the full story.

Life sciences. Apollo, Carlyle and EQT have all teamed up with VC firms to tap biotech growth market. The covid pandemic underscored the urgent need for expertise and capital to fund the next generation of healthcare and life sciences products and services.

To speed up their investments in the sector, private equity firms are quickly teaming up with other investment firms. Partnerships with venture capital firms in Europe are especially attractive to PE firms right now, as recent announcements demonstrate. I spent a lot of time on this story and interviewed nearly a half-dozen sources, including partners at the PE firms involved.

One thing these partnerships have in common is that the PE firms are trying to fill a void in life sciences. The pairings seem to provide a win-win, giving the PE firm early access to drug discovery and giving the VC firm capital and access to the PE firm’s LP base.

“The partnership allows us to bring the scale of our capital and couple that with Sofinnova’s expertise to think about new solutions for the market and new product creation, bringing a much greater scale of institutional capital to life sciences overall,” Neil Mehta, partner and global head of strategy of Apollo, told PE Hub.

Read the full story.

Car wash consolidation. I discussed this piece in my Wire debut last week, but Obey’s story deserves another mention. Investors have discovered the appealing attributes of the car wash business, including the basic service, strong margins, low working capital, labor efficiency and recurring revenue base.

“The sector is highly ripe for PE investments, especially as many owners look to retire and cash in on decades of building successful local businesses. In addition, new technologies, including data science and artificial intelligence, are revolutionizing the car wash business. Express services have become especially popular. Membership models are also satisfying PE’s appetite for recurring revenues,” wrote Obey.

Read the full story.

Well, that is going to do it for me. I am looking forward to recharging and refreshing after a long (in a good way) and productive week, so I can do it all over again next week! Wishing everyone a wonderful weekend!!