Fast-growing healthcare companies mean shorter hold periods, earlier exits for THL

"Exit timing is often driven by how quickly we can deliver against our value creation plan,” THL's Joshua Nelson said. “So, if we had a plan to do something in five years, and it took us only two and a half years to achieve those goals, then we will start thinking about exiting earlier.”

PE Hub’s new series on private equity firms investing in healthcare continues with insights from Joshua Nelson, managing director and head of healthcare vertical at Thomas H. Lee Partners. Nelson has been with THL for almost 19 years and prior to that, he worked at JPMorgan Partners, the private equity affiliate of JPMorgan Chase. He outlined THL’s approach to healthcare investing.

Investment strategy

THL invests in mid-market growth companies in three industry groups: financial technology and services; healthcare; and technology and business solutions. Within those industries, the firm focuses on identified sector opportunities (ISOs).

In the healthcare industry, THL is currently investing in five ISOs: pharmaceutical services; healthcare IT; home-based care; consumer healthcare; and med-tech services. While covid certainly plays a role, the firm tries to pick ISOs that are not dependent on covid for growth.

“In the home-based care ISO, our first investment in it was in 2014,” Nelson said. “The trend has been around for a while but accelerated with covid. We want to find the overlap – solutions that are good for the patient, better for the family and better for the payer (the government, in the case of hospice).”

“With the lowest cost setting of care – in the home – the primary goal isn’t to save money but to deliver a higher quality, more sought-after health solution for the patient, but you also happen to save the system money and make the patient happy.”

Demographic trends suggest demand for in-home hospice care will increase. “If you go back 15 to 20 years, 25 percent of people died in hospice care, and today it’s over 50 percent,” Nelson said. “My guess is, over the next 10 years, it will probably go up to 75 percent. You have a great tailwind there, as more people are starting to think, ‘What else can I do from, or in, my home, besides work?’ Getting cared for is one of those things that applies.”

Joshua Nelson, THL


“Everything is competitive in PE, hard to find an area that isn’t,” Nelson said. “Two things we focus all our energy on to differentiate ourselves is sector expertise (the ISOs) and operating capabilities. We have a strategic resource group (about 20 people), and they are aligned with our verticals and ISOs. They have our go-to-market strategies, sales forces, playbooks around how to sell into pharma, technology transformations and many other capabilities.”

One example of that is when THL invested in CSafe.

“This company, they only had 3 out of the top 20 pharma companies as a client when we invested. That was a perfect opportunity for us, as the SRG worked with that team. As of today, we now have 17 of the top 20 pharma companies as clients. We look for areas where we have unique experience and these differentiated operating capabilities to allow us to be a different owner than someone else might have been.”

2022 pipeline and tailwinds

“Our healthcare IT and pharma services ISO’s have very deep pipelines for this year.”

When it comes to addressing the labor challenges in the healthcare industry, Nelson added that the combination of healthcare and IT can be helpful. “There is an increased benefit for technology management and services products in a market like this with all the economic challenges,” Nelson said.

Firm facts

THL is a Boston-based growth investment firm founded in 1974. The firm specializes in leveraged buyouts, growth capital, special situations, industry consolidations and recapitalizations.

Recent investments

THL invested in Smile Doctors in January. (See the sidebar, below, for more details.)

Recent exits

“The last few years have been particularly strong in terms of healthcare companies’ performance,” Nelson said. “Underlying companies performed well, and also companies that were part of the solution, in terms of the pandemic. These companies have grown a lot and many of them have been very successful and that allows for exits to take place faster than the typical three-to-five-year hold period.”

“For us, our exit timing is often driven by how quickly we can deliver against our value creation plan,” he said. “So, if had a plan to do something in five years, and it only took us two and a half years to achieve those goals, then we will start thinking about exiting earlier.”

THL exited Syneos Health in June 2021 after investing in 2010. THL had a partial exit and recapitalization of Healthcare Staffing Services in March 2021 after investing in 2015. THL had a partial exit and recapitalization of CSafe in December 2020 after investing in 2016. THL exited 1800 Contacts in November 2020 after investing in 2014; as well as exiting PCI Pharma Services in November 2020 after investing in 2016.

THL’s healthcare portfolio highlights:

(Dates refer to initial investments.)

Adare Pharma Solutions: This company is a specialty contract development and manufacturing organization (CDMO) and global provider of advanced pharmaceutical technologies. The company leverages its taste-masking, extended release and microbiome capabilities to develop and manufacture novel, improved medicines and therapies for the global pharmaceutical market. (2020)

Agiliti: Formerly known as Universal Hospital Services, Agiliti Health, is a leading nationwide provider of healthcare technology management and service solutions to the healthcare industry. Agiliti owns or manages more than 800,000 units of medical equipment for approximately 7,000 national, regional and local acute care hospitals and alternate site providers across the US for nearly eight decades. (2019)

Autism Home Care Holdings, Inc: The company is a provider of Applied Behavioral Analysis services to children diagnosed with autism spectrum disorder and offers individualized treatment in both the in-home and in-center care settings. (2020)

CSafe Global: The company is a provider of cold chain packaging solutions that address the global supply chain needs of the biopharmaceutical industry. CSafe’s climate-controlled containers are designed to maintain high-value and temperature-sensitive biopharmaceutical cargo at precise temperatures for extended periods of time and in extreme external conditions. (2016)

Healthcare Staffing Services: HSS is a healthcare staffing services company focused on providing quality patient care and delivering improved patient outcomes throughout the US. Through its investment in Fastaff Travel Nursing and US Nursing Corporation. The company supplies rapid response temporary travel nurses for urgent staffing needs to maintain the continuity of care for its clients and their patients. (2015)

Hospice Care: The company is a hospice service provider in the US. Focused on providing high-quality care to individuals at end of life, primarily in home setting. (2020)

Nextech: The company is the complete healthcare technology solution for specialty providers. Since 1997, Nextech has been focused on delivering intelligent, intuitive, integrated solutions that empower specialty physicians to maximize efficiency, optimize charting accuracy and increase overall practice profitability. Nextech serves more than 11,000 providers and 4,000 practices in the clinical specialties of ophthalmology, plastic surgery, dermatology and orthopedics. (2019)

Professional Physical Therapy: ProPT, headquartered in Melville, New York, is a provider of physical therapy and rehabilitation services throughout the New York metropolitan area, New Jersey, Connecticut, Massachusetts and New Hampshire. Founded in 1998, Professional Physical Therapy operates almost 200 outpatient physical and hand therapy centers. The company’s outpatient physical therapy centers provide treatment to patients suffering from musculoskeletal impairments associated with orthopedic and sports injuries and other medical conditions. (2016)

Senior Home Care Holdings: The company provides care management services, financial support, and technology that enable families to care for their loved ones in the home. Senior Home Care Holdings care management teams, consisting of nurses and social workers, support thousands of consumers across multiple states. Consumers are typically seniors who need assistance with multiple activities of daily living. (2020)

Smile Doctors: The company is the largest orthodontic support organization in the US, providing business management and support services to orthodontic practices in the South, West, and Midwest. (2022)