The cross-border barriers to entry for European medical devices are still high despite a European Union regulation aimed at harmonising the market, Alexis Saada, head of growth and managing director at Ardian, told PE Hub Europe.
Ardian partnered with UI Investissement to take a stake in France’s Théradial earlier this month. Théradial is a distributor of medical devices, pharmaceuticals and supplements for nephrology-dialysis, oncology, gastroenterology, cardiology and clinical nutrition.
While some private equity firms, such as Sun European Partners, have said that the EU’s Medical Device Regulation has aided cross-border expansion opportunities for those that have adapted to the new rules, Ardian’s Saada said: “It’s the kind of barrier that we benefit from in France, as these are still very national markets.”
He did not see that situation changing in the near term. “It’s a grassroots business. If you want to be in contact with all the public hospitals, with all the private practices, all the associations, it’s something that you do on the ground. It’s not something that you’re going to do from one location, just by sending emails.”
Nantes-headquartered Théradial has a presence in Italy, but only in the software division. It has 90 employees across France and Italy.
Doubling up
Ardian, a Paris-headquartered private investment firm with $150 billion of assets under management or advisement, first took an interest in Théradial in 2017, when UI Investissement – a Paris-based company that focuses on developing unlisted French companies – first invested in the company.
As it was between funds at the time, Ardian could not invest. But since then Théradial “roughly doubled in size” and launched a couple of new initiatives, said Saada, making it “ripe” for Ardian to get involved, as lead investor alongside UI Investissement and management.
Ardian will look to roughly double size of the business again, from its level of around €50 million in sales, said Saada.
“We have a number of organic ways to accelerate Théradial’s growth. We could make select purchases when we find businesses that could complement what we are doing in terms of product line or geography.”
Potential growth could come from the main business of medical devices, which is still growing, said Saada. The newer business of medicines is also growing and will be aided by some new product launches, while the software piece can be exported but also offers growth potential. “The size of the company’s imprint on the French market gives it a unique position to leverage the data that is collected,” said Saada. “That will be a new line of business that we will help them develop.”
Inflating orders
When the time comes to exit, Théradial would be “an excellent candidate” for an LBO, given the high level of cash information it offers, said Saada. An industrial buyer could be another avenue, depending on the size it reaches. The firm would be unlikely to reach the size necessary for an IPO, he added.
The rising inflation environment could also have an impact on the company’s attractiveness.
“What is rather clear is that governments have already demanded in the past a number of efforts, in the upstream area of the value chain, and that at the other end of the chain, dialysis centres are hugely profitable,” said Saada. “If anything was to happen, which is obviously uncertain, I would expect this would be that end of the chain that would be asked now to make new efforts.”
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