Today Water Street Healthcare Partners announced it hired Hank Struik as a senior executive advisor. Struik is the former president of Cardinal Health, an $11.5 billion pharmaceuticals and medical products company.
Struik joins the Chicago-based firm six months after it closed its second fund with $650 million in commitments. Very little has been deployed to date, and Struik has come on board with a pretty straightforward mission: ‘Here’s $100 million from our fund, now find us a medical products deal.’ I spoke with him briefly this afternoon on globalizing medical products, why the industry is not recession-proof, and what buying opportunities he sees.
Water Street invests exclusively in health care companies. Why is medical products a specific area of interest for the firm right now?
Medical products, for me specifically, is what I know best. Given that I’ve spent 20 years in the industry, in the operating room as well as on the respiratory and neurological care side, I believe there are numerous opportunities to look for good companies that can grow on a global scale.
A lot of people say healthcare is recession-proof. How does the recession affect the medical products sector (if at all)?
Medical products are not necessarily recession proof. When there’s a tightening of the belt from the hospitals, that affects both sides. Hospitals will try to get more life out of equipment instead of replacing it. We have definitely seen some of that occurring. But, in the environment that we’re in today, the cream tends to rise to the top. Those businesses and products that have predictable outcomes and shorten the length of stay on patients in the hospitals are still in high demand and are the most recession proof.
That is one of the nice things about Water Street, with the firm’s depth of expertise with its CEO operating partners, and the partners’ connections in the industry, we have the opportunity to truly look at this on a global level.
Are there any particular geographies that interest you most?
No, we’re focused more on disease states and product categories. The thinking is, if you have protocols that are capable of improving outcomes, those should be applied on a global basis. The product itself may differ in certain countries, and the degree of technology embedded and cost structure may differ, but the core ought to be something that’s portable.
How will your duties at Water Street differ from your time at Cardinal?
When I was at Cardinal, I was running 4 businesses with total revenues of almost $1 billion. Here at Water Street, it’s about looking at potential attractive spaces and finding non-strategic carve outs. If you couple them with other technologies you can build a nice sustainable business that we can grow on a global basis. My primary role will be to identify some of those businesses to grow and develop them.
How involved will you be in operations?
My role is basically role to find my next job, so I’ll be the CEO of the company once we complete the transaction.
Do you have any targets in mind?
We have several potential platforms and ops in mind. It’s technically my first week here, but we’ve been looking at some things over the past month.
How many deals will you do with the $100 million? Do you plan to do a platform, or one larger deal?
Water Street is well-financed. We’ve put some placeholders out there with regards to target size. The revenues would be from $50 million to $500 million. If we found something attractive that is larger, we wouldn’t be opposed to partnering with someone. But those criteria are more like guardrails than anything else. We’re looking at some attractive opportunities, and depending on whether we can complete them, that will dictate the add-ons.
How much of a buying opportunity is out there now? Are companies actually selling? Have their price expectations come down?
The impact this has had, depending on whether you’re a public company or a private company, varies. For private owners, this was a big wake up call. People in the past expected premiums, but their expectations now are more reasonable. People’s multiple expectations have come more into line, and we may even see a little multiple compression. People are still questioning timing on divestitures, though.