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Baird notches fourth healthcare exit

The firm’s sale of Medical Education Technologies to defense contractor CAE is its fourth exit from the healthcare industry this year.

Baird Private Equity has exited Medical Education Technologies, grossing the firm a 2.5x return. CAE, a defense contracting company, purchased a full stake in the company for $130 million cash.

Florida-based Medical Education, which provides simulators and other learning tools to educate and train healthcare professionals, is Baird’s fourth healthcare sector exit this year. In January, the firm sold its interest in Campbell Alliance, a pharmaceutical consulting firm, to inVentiv Health. Baird’s venture capital wing also made a pair of exits, Interlace Medical and Accuri Cytometers, earlier this year.

Despite the firm’s recent activity, Baird is not in the process of selling off its healthcare portfolio, partner Gordon Pan said.

“We still believe it’s a very strong place to invest. You can’t argue the percentage of GDP healthcare represents; the fact that you have an aging demographic. People are going to continue spending on healthcare,” he said. “There are a lot of areas where [the healthcare sector is] a bad place to be, because of regulations, regulatory issues, reimbursement challenges. But there are a lot of areas that are very positive to the trend lines that are out there.”

Baird purchased the family-owned company in 2008 through Baird Capital Partners IV, which closed on $300 million in 2007. Pan classified Medical Technology as a “pick and shovel” service provider that addresses rising demand for healthcare without directly confronting new US regulations, which may adversely affect hospital balance sheets.

In July, shares of private equity-backed HCA Holdings plummeted after analysts indicated that The Patient Protection and Affordable Care Act of 2010 may have contributed to the hospital system’s disappointing earnings report. The rules instituted a number of sweeping healthcare reforms intended to drive down costs and add an estimated 30 million Americans to the healthcare system, may have contributed to slowing Medicare and Medicaid reimbursement rates.

“We don’t take a lot of what you call provider risk, we don’t buy hospitals, because they take a lot of the direct regulatory risk and direct reimbursement risk,” Pan said.

Baird is one of several firms to cash out on healthcare recently. Earlier this month, KPS Capital Partners’ sale of Attends Healthcare generated a 15x cash-on-cash return and a 120 percent internal rate of return. CCMP Capital made five times its money after selling Medicare services company CareMore Health Group to health benefits company WellPoint in June. During the first quarter of the year, Bowmark Capital sold Advanced Childcare to GI Partners and Onex sold Emergency Medical Services to Clayton Dubilier & Rice, generating return multiples of 4x and 10x, respectively.