Advent bets on attractive healthcare sector

Advent International is trying to complete its third healthcare deal of the year in the sector that has proven attractive to firms as an area of stability in the sluggish economy.

Healthcare has remained a target for private equity firms as governments struggle with ailing budgets and aging populations — just the kind of market dislocation on which the industry thrives. Advent International, like several other private equity shops, has been trying to tap into those opportunities. 
 
Advent reached an agreement with listed Dutch pharmaceuticals company Mediq to make a €775 million offer to take the company private, the firm said in a statement Tuesday. The deal would mark Advent's third healthcare-related transaction of 2012.
 
The offer is backed by Mediq’s management board and supervisory board and 20 percent of its shareholders. Any

The returns are not necessarily high, but they are stable and predictable. We believe private equity can actually help with the financing of the health system and keep it available to everybody.

Felix Zwart

third party offer would need to be 7.5 percent higher than Advent’s bid, the company said in a statement. Additionally, Advent would be allowed to try and match the offer. Deutsche Bank is the lead financial advisor for the deal. BNP Paribas and Rabobank are acting as financial advisor to Advent, whereas ING Bank is acting as financial advisor to Mediq.  

Healthcare
target

Tom Allen and Bram Grimmelt said in the statement: “We have been seeking an investment opportunity in the healthcare distribution sector for several years and are excited by Mediq because we see it as a strong business that can be built into a global leader. “
 
In April, Advent invested in Indian hospital chain CARE and in June in Connolly Inc, a recovery audit company which also focuses on healthcare. In the last two decades Advent has invested in more than 30 healthcare companies across a wide range of subsectors. 
 
The sector is increasingly popular with private equity firms in The Netherlands, a recent study from Dutch consultancy firm Boer & Croon shows. There are more specialist funds that specifically focus on healthcare deals, such as NPM Healthcare and Gilde Healthcare Partners. Waterland Private Equity Investments is another firm that has tapped into the healthcare sector. In recent years it bought and sold dental company Excent. It also invested in care homes, medical laboratories and orthopaedic services.
 
As government budgets are under pressure and many Western countries face the challenges of an aging population, the healthcare sector could have a lot of unlocked potential. “The returns are not necessarily high, but they are stable and predictable,” said Felix Zwart, analyst at the Dutch association for private equity, NVP. “We believe private equity can actually help with the financing of the health system and keep it available to everybody.”