Archimed on ‘challenging’ healthcare exits

PE’s increasing interest in take-privates.

Slow and complicated are words we’ve heard applied to the current exit market this year, making each exit that does happen even more interesting. This morning, we’ve got a deep dive into Archimed’s sale of Vita Health Group, as Craig McGlashan speaks to partner Robin Filmer-Wilson.

Take-privates is another topic we’ve been tracking recently. Global law firm Dechert has some fresh data points for us to look at this morning, including a staggering increase in PE firms’ interest in listed companies.

Speaking of take-privates, there is an update on KKR’s bid for Telecom Italia’s fixed-line assets, a deal we’ve been following for some time.

Encumbered exits

Let’s kick off with a closer look into a healthcare exit. Craig McGlashan caught up with Archimed partner Robin Filmer-Wilson about the firm’s sale of Vita Health Group, a UK healthcare provider.

Spire Healthcare Group bought Vita in October for £74 million ($90 million; €85 million), giving healthcare-focused investor Archimed a 4.5x return on investment and 25 percent annual return over the roughly eight years it held the UK healthcare provider.

Such returns on exits are not easy in the healthcare market right now – if they can be made at all, Filmer-Wilson told Craig.

“It’s been horrible,” he said. “It’s been really, really challenging and a lot of deals have been pulled from the market or just not happened, or entrepreneurs are still hoping for valuations from 18 months ago.

“The psychology is yet to reset. A number of companies were hoping to grow into those valuations – get to 20-30 percent growth a year, like a lot of companies did during covid. But the covid reset has well and truly come, so very few companies are anticipating any significant revenues from covid-related work.”

Take a look at the full story here, which covers Vita’s growth figures and how Archimed pivoted Vita towards mental health during the ownership period.

Increased intentions

Next up, we have some numbers on private equity’s outlook and expectations. Global law firm Dechert published its sixth annual Global Private Equity Outlook report. The report is based on responses from senior executives within PE firms in the UK, EMEA, North America and APAC.

One figure in particular stood out to me: according to Dechert, 94 percent of respondents are likely to pursue take-private transactions, compared to 2022 when only 13 percent of GPs expressed intentions to do so.

“The long-heralded wave of take-privates has now finally arrived,” said Chris Field, co-head of Dechert’s PE practice and the firm’s London corporate group. “We are seeing a trend in the UK, and globally, that there is much greater willingness from PE firms to engage with the public markets. Firms are seizing on attractively priced companies.”

On that trend, Craig McGlashan recently caught up with Searchlight Capital Partners’ founding partner Oliver Haarmann, who spoke of the benefits these deals have for UK businesses.

Haarmann said an added bonus from the UK’s perspective of the two take-privates that Searchlight has completed this year – alternative asset manager Gresham and conference business Hyve – was that both companies will remain headquartered in the UK, ultimately creating more jobs and tax revenues for the country if the companies grow.

Management teams also see advantages, said Haarmann. “A lot of management teams would prefer to be in private equity hands because they don’t have to run around every quarter talking to public market investors who have a cursory knowledge of their business.

“You have more informed shareholder discussions; potentially quicker, more efficient decision making on major decisions; and better compensation. It’s not hard to see why management is receptive to private equity.”

You can read the full story here.

Other interesting data points from the Dechert report include 71 percent of respondents expecting the rise in regulatory scrutiny to negatively impact dealmaking plans over the next 12 months, and 50 percent viewing GP-led secondaries and continuation funds as growing trends related to the current economic environment.

A step forward

Before signing off, we have an update on KKR’s bid for Telecom Italia’s (TIM) fixed-line assets. Yesterday, TIM’s board of directors approved KKR’s offer, which values the fixed network at up to €22 billion, and allows the group to reduce debt by around €14 billion, according to a statement.

The transaction is expected to close in the summer of 2024, once the preparatory activities are completed and the precedent conditions are met, the release added.

To catch up on the process, take a look at our previous coverage on the bid here.