Morgan Stanley wins auction for WindRose’s Ovation Fertility

  • Deal said to command ~12x Ebitda multiple
  • Los Angeles company encompasses 11 labs focused on reproductive health
  • Ovation marks 2nd healthcare investment for MSCP following Clarity Software

Morgan Stanley Capital Partners prevailed in the sales process for WindRose Health Investors’s Ovation Fertility, Buyouts has learned.

The investment concludes what sources characterized as a robust sponsor-focused auction for the Los Angeles network of in vitro fertility and genetic testing labs. Buyouts reported in early April that the Harris Williams-run process was in its second rounds.

Ovation’s Ebitda lies at approximately $12 million to $13 million, two sources said. One of the sources said the deal commanded an approximately 12x multiple of Ebitda, suggesting a valuation around the ballpark of $150 million.

The transaction was led by MSCP Managing Director Steve Rodgers, who joined the middle-market firm from J.H. Whitney Capital Partners in April 2018 to head up a dedicated healthcare effort.

Ovation is the second healthcare deal out of MSCP’s mid-market fund, North Haven Capital Fund VI. MSCP invested in Clarity Software Solutions in January.

MSCP, taking a majority stake, backed Ovation alongside existing management and physician shareholders. CEO Nate Snyder will continue to lead the company.

New York’s WindRose, then called MTS Health Investors, formed Ovation Fertility in 2015 through the marriage of four IVF labs across Tennessee, Texas, Nevada and California.

WindRose Partner Alex Buzik declined to comment on deal metrics, but noted that much of the success was due to Ovation’s differentiated strategy of focusing on the IVF laboratories and related ancillary services in close partnership with its affiliated physician practices.”

While most existing investors in reproductive medicine are focused on infertility clinics or egg freezing, Ovation is unique in that it operates 11 labs across the U.S. that provide various tests and related services for infertility patients.

IVF lab services range from Anti-Mullerian hormone (AMH) testing to determine a woman’s ovarian reserve to computer-automated time-lapse analysis and Omics technology to evaluate embryonic development. The company also provides genetic testing services and egg & embryo storage.

While in its early stages, the broader fertility services market is gaining fast traction among the PE community as underlying demographic trends like same-sex marriage and more women postponing motherhood fuel demand.

The small group of existing sponsors with investments in IVF treatment includes Lee Equity’s Prelude Fertility, TA AssociatesCCRM and Sagard Capital PartnersIntegraMedSverica Capital’s WHUSA offers practice management services to IVF and OBGYN clinics.

In recent activity, EQT Partners in February snapped up a majority stake in Igenomix, a Spanish company operating labs that support reproductive medicine worldwide.

GI Partners, meanwhile, backs a large piece of the donor-sperm and egg-bank market through its investment in California Cryobank. Regal Healthcare Capital Partners recently led a $15 million Series A investment in Extend Fertility, New York’s largest provider of egg freezing.

DLA Piper offered legal advice to MSCP on the transaction.

Action Item: Check out MSCP’s latest Form ADV: