Vance Street Capital has invested in several medical technology companies over the last couple of years. The Los Angeles firm closed its third buyout fund with $432.5 million in commitments at the end of last year. Vance Street has already completed six platform investments out of Fund III, including Wytech Industries (which makes specialty medical wire and tubing), Excel Scientific (films and foils used in life science applications) and Plastic Design Corporation (medical micro molding). As part of our ongoing series profiling private equity firms investing in healthcare, PE Hub spoke with Brian Martin, managing partner, who has been with the firm since 2010.
Step by step
“When we get involved, we are usually the first institutional capital partner, so we like to spend the first 12 to 18 months working on foundational aspects,” Martin told PE Hub. “That means looking at ERP, sales and marketing, capex budget and spending.”
After that first phase, the firm shifts to more of an expansion focus.
“During years two and three, we focus on operational improvement and strategic add-ons to expand products, capabilities, customers or geographical reach,” he said. “In years four and five, we begin to think about an exit strategy and help our founders and CEOs plan for the next phase of ownership.”
“Typically, two-thirds of the time when we talk to a family or entrepreneur, they are thinking about estate planning and retirement,” Martin said. “What makes us unique is that we not only know the industry, but we can help them on the human capital side. We have an incredible network, because we have been investing in medtech and life science companies for more than 20 years, and we introduce our companies to industry experts, talented operators and valuable network contacts.”
Vance provides more than just capital.
“We provide a network, talent, and hands-on expertise, and our level of involvement is dependent on what each company needs,” Martin said. “In some instances, the founder is ready to fully transition away from the day-to-day. In other instances, the founder is executing well in several areas but needs our help to fill in the gaps.”
Word of mouth
“We don’t always wait for a broker or banker to reach out to us. We have a proprietary database of hundreds of companies, and we selectively pursue founders for years,” he said. “We can also refer companies to our operating network so we can add value and get to know them well before they are ready to transact. An incredible amount of our deal flow also comes from our portfolio companies and word-of-mouth referrals in the industry.”
Martin “feels good” about the firm’s deal flow and pipeline for this year.
“We have been active on the strategic add-on front, as we just closed an add-on and have two more under letter of intent so that has kept us busy,” he said.
“Labor is and has been the biggest challenge for us,” he said. “Across the board, we have been increasing wages to ensure our labor force is well taken care of. One of our companies is providing gas cards, for instance, to offset gas prices for commuters.”
“Our medtech companies are performing well, and we do a lot of hard work during the first three to five years, and when a company continually exceeds our performance metrics, it’s hard to part with them,” he said. “But we have to balance the priorities of our portfolio company founders and investors. When we have an opportunity to extend the timeline of our involvement through a continuation fund, it’s a nice option.”
Vance Street sold A&E Medical to Zimmer Biomet for $250 million in December 2020.
Vance Street invested in Excel Scientific and Wytech Industries in 2020 and Plastic Design in 2021. (See sidebar blow for more information.)
Vance Street’s healthcare portfolio highlights
(Dates refer to initial investments.)
Adam Spence Vascular Technologies: A provider of advanced medical catheter components. This was a carve out from WL Gore in September 2017, then sold to Spectrum Plastics Group in 2018. Vance Street reinvested a portion of the firm’s proceeds. (2017)
Applied Plastics: A provider of specialty PTFE coated wires and other metal-based components going into medical device industry, with a primary focus on the advanced catheter market. (2019)
A&E Medical: A medical device OEM designer and contract manufacturer primarily focused on single-use products used in cardiovascular procedures. Add-ons for this investment include Medical Concepts Europe (2016), RTI Surgical’ s Cardiothoracic closure business (2017). Sold 100 percent Zimmer Biomet December 2020. (2016)
Excel Scientific: A manufacturer of microplate sealing films and foils, specializing in medical-grade adhesive-based consumables to life science research, university, and testing laboratories as well as biotech companies, pharmaceutical companies and diagnostic providers. (2020)
Motion Dynamics: A manufacturer of wire based micro-components and sub-assemblies, which are frequently found in micro-catheters, pacemakers, neuromodulation devices and in various other industrial and aerospace and defense applications. In 2020, acquired add-on ViaMed. (2016)
Plastic Design Corporation: A contract manufacturer specializing in precision micro molded parts and services for the medical device and life sciences industries. (2021)
Wytech Industries: A manufacturer of specialty core wires, precision ground and straightened wires and hypotube-based components and assemblies for a wide range of advanced guidewires and delivery systems, primarily utilized in interventional medical applications. (2020)