Private Equity News & Analysis

Encore reaps 3x with healthcare exit

DFJ Esprit’s VC secondaries arm, which is backed by Coller and HarbourVest, has sold a medical device company for $330m.

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Encore Ventures has made its first major exit with the $330 million trade sale of ApaTech, a UK-based orthopaedic implant maker, to New York Stock Exchange-listed healthcare company Baxter International.

The deal is expected to generate around a 3x return based on ApaTech’s 2008 funding round, which was led by 3i and HealthCor Partners. The financing round raised $45 million, valuing ApaTech at about $100 million at the time. The company has raised more than $60 million from investors, according to its website, since spinning out of Queen Mary University London in 2001.

When we spun it out of the university in 2001, it was effectively only one employee and some very strong intellectual property.

Nigel Pitchford
ApaTech was among a portfolio of about 30 European venture assets Encore purchased from 3i in September 2009, part of 3i’s continuing winding down of its venture activities. The portfolio sale, which was backed by secondaries firms Coller Capital and HarbourVest Partners, effectively launched Encore as a separate, secondaries-focused division of European venture firm DFJ Esprit.

Several former 3i venture-focused professionals have since joined Encore, including Nigel Pitchford, who joined 3i in 1997 and had been the firm’s head of venture healthcare investing.

Pitchford led 3i’s original £3 million investment in ApaTech in 2001.

“When we spun it out of the university in 2001, it was effectively only one employee and some very strong intellectual property,” Pitchford recalled. Today, ApaTech is consistently ranked among Europe’s fastest growing healthcare companies, having recently been named Britain’s fastest growing medical technology company for the third straight year. Last year, the company generated $60 million in sales.

ApaTech’s achievements highlight the success possible from early stage investing, Pitchford said.

“The fact [3i] backed this company, stuck with it and [in 2008 decided] to invest again and really go for the expansion”, he said, is also a “vindication of a more aggressive strategy particularly geared towards companies where you can see there are demonstrable growth”.

Tech-focused venture firm MTI is also an investor in ApaTech, having invested in a 2004 funding round.