French healthcare firm ArchiMed scores 400 pct IRR on first exit

ArchiMed commanded a 400 percent internal rate of return on its sale of Herb’s International Service just months after buying the nutraceuticals company.

The French private equity group sold its majority stake in HIS, which produces plant-based nutritional ingredients, for an enterprise value north of 25 million euros ($26.5 million). ArchiMed said it earned about 2.5 times its initial investment in the Lyon, France, company.

The buyer is German ingredients giant Doehler.

For ArchiMed, a 3i Group spinout dedicated to healthcare investments in Europe, the exit is its first since its 2014 inception.

It also comes less than 10 months after it bought its stake in HIS and not even two years since the firm closed its first fund. HIS represented the firm’s first investment out of MED I FIA, a 150 million euro fund that closed in June 2015.

Archimed will soon have invested about three-fourths of that fund, Vincent Guillaumot, a managing partner and co-founder, told Buyouts.

Initially, the timing to sell HIS was “absolutely too early for us and too early for management,” but an unsolicited approach from Doehler presented what Guillaumot described as a rare scenario.

Importantly, ArchiMed had reached all its milestones when it came to HIS, professionalizing the company from various perspectives. The firm’s strategy included improving its ESG — environment, social and governance — policy and new hires at the board level, as well as in the sales, finance, production and R&D departments.

The firm also supported the expansion of production capacity, while adding consulting services.

“It was validation of our investment thesis,” Guillaumot said. That includes identifying companies that are under the radar and crafting them so they are an attractive play for trade buyers, he said.

Doehler also was convincing on price, he said. At the same time, an opportunity to gain access to the suitor’s global network appealed to HIS management. Indeed, the Darmstadt supplier of natural food and beverage ingredients has a sales presence in more than 130 countries and 47 production sites and application centers.

HIS’ nutritional ingredients serve end markets including pharmaceuticals, cosmetics, dietary supplements, extraction plants, food and veterinary. The company had close to zero debt and was profitable upon its initial investment, Guillaumot said.

The HIS management team will retain its significant stake in the company and a “substantial deferred incentive,” according to the announcement.

ArchiMed was founded by Denis Ribon, the former global head of healthcare at 3i, alongside his former 3i team members, Guillaumot and Robin Filmer-Wilson.

Guillaumot, who said he considers ArchiMed more of an “industry conglomerate” than a PE firm, said 90 percent of its deals are sourced directly outside an auction. He declined to elaborate, but said more liquidation events and platform investments are on the near-term horizon.

ArchiMed turned to MazarsFrédéric Maurel for auditing, Orsay’s Samira Friggeri for legal counsel and Jean-Pierre Chaux of Neptune for tax services.

Alexandra Rohmert of CMS BFL provided legal and tax advice to Doehler.

Action Item: Reach Vincent Guillumot at vincent.guillaumot@archimed-group.eu

Vincent Guillaumot, a managing partner and co-founder of Archimed. Photo courtesy of the firm.