ArchiMed sets sights on US with its largest healthcare fund

The firm held a final close on €1bn for its third fund – Europe’s largest healthcare vehicle – in late August.

European healthcare specialist ArchiMed, which has gathered €1 billion for its largest and latest vehicle, is finalising setting up its first overseas office this month, Private Equity International has learned.

Antoine Faguer, a partner at ArchiMed, will head up the outpost in New York, according to a firm spokesman.

The Lyon-based healthcare investor was planning to open an office in the US in mid-2018 to support international expansion for its portfolio companies, Denis Ribon, chairman at ArchiMed, told PEI in February that year. The volume and complication of deals that ArchiMed was doing and the human resources required for those transactions put plans on the backburner, the spokesperson said.

The move is timely as the firm has just wrapped up fundraising for MED Platform I, its third vehicle, exceeding its €800 million target. The fund is ArchiMed’s first dedicated buy-and-build vehicle focused on mid-cap companies and will invest in Europe and North America.

This week the firm made its third platform investment from the vehicle in NAMSA, a medical devices-focused contract research organisation based in Ohio, in a transaction valued between $350 million and $400 million, a source told sister title PE Hub.

Its other investments from the fund are BOMI Group, a Cremona, Italy-based healthcare logistics company and Direct Healthcare Group, a fully integrated manufacturer of innovative pressure care products based in Wales, according to statements from the firm.

Commenting on MED Platform I, Ribon said the capital raise came at a time when deal activity in the healthcare sector has been building over recent years, which has accelerated because of covid-19.

“We have never seen such a level of activity in the sector, from exits to new investments or add-ons. Focusing on biopharma, medtech and life sciences industries, and not on the care provider sub-sector, also means we are quite protected from the on-going health and economic crisis,” he said.

MED Platform I will invest between €50 million to €500 million. The firm’s earlier funds, the 2017-vintage, €315 million Med II and the 2014-vintage €146 million Med I, were both focused on small-cap businesses.

Focus sub-sectors for the firm include biopharma, medtech, life sciences, healthcare IT, public safety and consumer health, according to its website.

There is significant potential for buy-and-build opportunities across the healthcare industry, with a lot of the domestic markets in Europe still reasonably fragmented, Ribon said.

“We think there are outstanding opportunities to consolidate some of the healthcare sub-sectors when you have the right platform, which can be difficult with small businesses that don’t have the scale to act as consolidation platforms,” he said.

MED Platform I was oversubscribed and received capital from institutional investors and family offices in Europe and North America, the firm said in a statement. French investment firm FFP invested €80 million, according to PEI data.

MED Platform I is the sixth-largest healthcare and life sciences-dedicated fund globally, PEI data show. Blackstone’s inaugural life sciences fund, which closed on $4.6 billion in July, is the largest vehicle. European healthcare specialist GHO Capital Partners raised €975 million for its sophomore vehicle in November.

Buy-and-build strategies, in which PE firms invest in a platform company to make sequential add-ons of smaller companies, show higher profitability compared with individual businesses, according to a study by researchers at the Netherlands’ Tinbergen Institute. The study, which analysed 818 platform investments and 1,346 follow-on acquisitions completed from 1997-2016 in seven major European PE markets, found that buy-and-build transactions enhanced the operating results of consolidated entities by 27 percent on average over the first five years.

Demand for healthcare assets is expected to remain high across Europe in the near future, according to a report from Bain & Co. This is due to the region’s strong underlying market dynamics, healthcare’s outperformance relative to the general market, record levels of dry powder, greater appetite for carve-outs due to high multiples, appetite for public-to-privates and the pipeline of secondary assets, Bain noted.