European healthcare specialist ArchiMed has been building its US operations and has signed three platform deals there in the past year.
The Lyon-headquartered firm, which had delayed the initial launch of its New York office in 2018, opened a base in the city in September with chairman Denis Ribon overseeing building out the team. Antoine Faguer, a partner, will head up the outpost. Justin Bateman, a former managing partner at BC Partners, joined as a partner this year, as well as Monica Holec, a former senior managing director and head of investor relations at Levine Leichtman Capital Partners, who was hired as principal in investor relations.
ArchiMed is deploying two funds: the €1 billion, 2018-vintage MED Platform I, its first dedicated buy-and-build vehicle focused on mid-cap companies in Europe and North America; and the €315 million, 2017-vintage, small-cap focused Med II.
Private Equity International spoke with Ribon about ArchiMed’s push into the US market and competition in the healthcare industry.
Why did you set up an outpost in the US?
We have always been active in North America since our aggregated portfolio companies generate 45 percent of their revenues from the US market, and 40 percent in Europe, despite being mainly European companies.
First, we set up an office to support our European companies’ expansion in north American markets and to manage our US-based investments. It’s simpler, more efficient and more effective to have a permanent presence there.
Second, we want to have the best possible market coverage, market intelligence and network in our sub-sectors.
In terms of number of deals in our portfolio, 80 percent come from Europe and 20 percent from the US. By investment value, 70 percent are European and 30 percent are American.
Why is the US a key market for European healthcare companies?
The importance of the US market can’t be overstated – its scale and depth of innovation are interesting for our European companies. The US remains the number one market for the healthcare industries, followed by the five largest European countries, as well as Japan, Canada and China.
As investors, we have made acquisitions for our companies in the US, either for product range expansion or market penetration. We also supported them in a more organic and more audacious way by replacing a lot of third-party sales in the US with direct sales. That proved extremely successful with firms such as German neurodiagnostic group Micromed and French biotech company Polyplus.
Similarly, US companies are also very keen to develop in Europe. That facilitated our partnerships with the founders and families owning Florida-based healthcare IT company ActiGraph and Ohio-based medtech contract research organisation NAMSA.
What do you think about the competitive landscape in the US? Is the healthcare sector overheated?
Private equity is overheated globally, and everybody wants to get into healthcare and technology. The US market is not any different from Europe. We don’t find it less or more competitive. It’s very similar.
We almost always compete against strategic buyers and almost never face competition from private equity groups. We are growth investors, not value investors. We only want to invest in outstanding companies in our specialised sub-sectors and in category leaders with plenty of potential.
The challenge for us is that we have to pay for those assets. Frequently we’re investing in complex deals such as corporate carve-outs, take-privates, firms facing succession issues, or businesses with cutting-edge yet not easily understood technologies.
We have 45 people on the ground only focused on our very narrow sub-sectors. We’ve also internalised a number of functions such as regulatory due diligence, which is extremely important for healthcare industries. That means we can execute deals very smoothly. We are also flexible in terms of the deals we do – with families, founders, other private equity firms, and both private and publicly-listed groups.
We are committed to this space – buyout investments in the healthcare industry – and we are not interested in anything else.
Denis Ribon is the chairman of ArchiMed and head of ArchiMed’s management committee