Private equity seems to be slowly throwing off its veil of secrecy. First, Providence Equity’s Jonathan Nelson made his television debut to give the industry a public face. Now, there is the creation of the first-ever (as far as we could tell) sector-focused PE trade group: The Healthcare Private Equity Association, or HCPEA.
It’s pronounced “hic-pea,” and, as founder Brian Miller tells us, it’s not a lobbying group. Instead, it’s a way for PE investors in healthcare to keep up on what’s happening in healthcare products and services, share notes on financial reform developments, train their associates and generally catch up for dinner.
Think of it as what PE investors do at healthcare conferences held by banks – minus the banks.
The idea was cooked up over Thanksgiving – remember when healthcare was being debated in Congress? – by Miller, a partner at Chicago’s Linden LLC. Miller mentioned to us that healthcare private equity has slipped as an interest within the private equity community. (Our guess: it probably has something to do with that massive 2,000 page reform bill).
He then rattled off his evidence: The healthcare sector is 17% of America’s GDP, but it accounts for only 15% of the S&P 500 and last year accounted for only 2% of all leveraged buyouts by volume. And while all healthcare companies have a collective market cap of $1.3 trillion, about 70% of that is pharmaceuticals and biotechnology. The rest of the industry is highly fragmented, with lots of small companies. Many of them are still private. “Through the public markets, institutional investors aren’t getting broad enough exposure to the healthcare economy,” Miller objects.
Miller, clearly a devout capitalist, nonetheless has some collectivist ideas about investing: He believes it works better when rivals find a way to share some ideas about the direction of their industry – or, in this case, help to shape that future. He also has something of a history of being a private equity community organizer. Back in business school at Harvard, he became active in the healthcare alumni association. In 1998, as a young healthcare private equity associate, he created Private Equity Analysts of Chicago, or PEAC, a group designed to allow young PE analysts and associates to share information about different firms, applications and other aspects of getting in on the lower rungs of the business.
Miller has already scheduled four events for the next eight months: two dinners on healthcare products and healthcare services, a day of training healthcare associates around the country, and an awards dinner in January. He has attracted 40 firms to his group, including everyone from Apax to Welsh Carson Anderson & Stowe. The HCPEA board is loaded with healthcare firms and healthcare-group leaders from firms including Madison Dearborn and Cressey & Co.
Even though Miller wants the industry to get more attention, and he wants to attract more new members, he doesn’t want HCPEA to get massive eough to require fulltime leadership. “Everyone who runs it still has their day jobs.”