Keeping pace with its widening umbrella of growth-oriented healthcare companies, Thomas H. Lee Partners is building out the vertical’s investment bench as it brings on veteran healthcare investor Shahab Vagefi.
Vagefi will start the first Monday of October as a managing director, focused on healthcare, with a particular emphasis on healthcare technology.
Vagefi joins THL from Martis Capital (formerly Capricorn Health), which he joined in 2010 as a founding partner. In August he departed from the healthcare-focused private equity firm, affiliate publication Buyouts reported earlier this month. Before Martis, he worked at Carlyle Group for three years as a senior associate, according to his LinkedIn profile.
The addition follows a busy several months of healthcare dealmaking at THL. “We’ve had an objective and an output to grow,” Josh Nelson, who heads the firm’s healthcare vertical, told PE Hub in an interview. “We need to keep up on the human capital side with the growth in the portfolio.”
Over the past 20 years, THL has invested approximately $5 billion in over 20 healthcare companies. The last 18 month have been busy, with five THL healthcare portfolio companies partially or fully monetized – Syneos, CSafe Global, HSS, PCI Pharma Services and 1-800 Contacts. It also took Agiliti public, while investing in new platforms including Adare Pharmaceuticals, Autism Home Care Holdings, Hospice Care and SeniorLink.
Vagefi is THL’s fourth healthcare-focused managing director, joining Nelson, Megan Preiner and Jesse Searby. The firm’s dedicated healthcare investment team stands at 15-plus members today, including a few healthcare executive advisers, up from just two or three about 15 years ago when its industry groups were formally created.
Although THL’s distinct healthcare and technology franchises have long collaborated to invest behind the intersection of the two industries, Vagefi will amplify those efforts in what represents a growing market opportunity. “We’re growth investors and at a very macro level, the growth in the economy sits in healthcare and technology,” Nelson said.
Vagefi while at Martis sat on the board of directors of Credible, which merged with Warburg Pincus-backed Qualifacts about a year ago. The combined electronic health record platform specializing in behavioral health is now called Qualifacts-Credible.
He also was a board member of Altruista, a payer care management SaaS business, which was acquired by Blackstone-backed HealthEdge Software earlier this year; as well as worked on transactions including HHAeXchange, a homecare software business, and EHR giant Epic Systems.
For THL, its growing roster also reflects its ambitions to go really deep in each of its ISOs (identified sector opportunities) targeted across its three industry groups – financial services, healthcare and technology and business solutions.
In today’s competitive and high-priced healthcare deal environment, specialization beyond just the end-market allows THL to “have the right to be successful and the right to win,” Nelson explained.
“Ten to twelve years ago it was enough for us to be a healthcare-focused investor because that was specialization in and of itself. Now, you really have to be a pharma services investor or a healthcare IT investor to be really differentiated.”
THL’s nearly 20-person strategic resource group supports that playbook. For example, certain SRG members played active roles at former portfolio company inVentiv over the course of THL’s 11-year investment in the pharma services company, Nelson said.
Having that tool gives THL’s investment team the conviction and confidence to “start with something smaller and have a real thesis around what we’re going to build around that starting point,” Nelson said.
THL has also purchased more than one healthcare company from Martis over the last 24 months, starting with its December 2019 acquisition of Autism Home Care Holdings (then known as Centria Healthcare). The deal assigned the autism-treatment provider a total enterprise value of approximately $415 million, PE Hub sources said at the time.
Less than a year later, THL bought Care Hospice from Martis in October 2020 in a deal valuing the end-of-life services provider around the ballpark of $750 million, PE Hub wrote.
The growth of the investment team comes as THL raises capital for its ninth fund amid a torrid fundraising cycle. Buyouts wrote in February that the vehicle was experiencing strong demand for the fund, but would still cap commitments at $4.9 billion.
THL has been doubling down in other areas, too, launching its first-ever, non-flagship fund in 2020. THL Automation Fund, which closed at $900 million, invests in partnership with the flagship fund in companies that provide automation products, software or services, using technology to improve productivity in business processes.
Chris Witkowsky contributed to this report