Mid Europa portfolio company Regina Maria has made its first acquisition after buying a market-leading private hospital in the Romanian capital Bucharest.
Ponderas Hospital, trading as Delta Health Care and Delta Health Trade, joins integrated Romanian healthcare services business Regina Maria, which was itself acquired last year by Mid Europa’s Mid Europa Fund IV.
The fund closed on €800 million in January 2014.
Mid Europa senior partner Matthew Strassberg told Private Healthcare Investor that the fund was now 35 percent invested and in line with the group’s three to four year fundraising cycle.
“We’re on track in terms of pacing,” he said.
Strassberg told PHI that the addition of the “state-of-the-art” hospital would be the first of “several” more buy-and-build acquisitions in Romania for Regina Maria, echoing the firm’s business strategy for Polish integrated private healthcare operator, LuxMed, which it had owned through its 2007-vintage €1.5 billion Fund III.
Mid Europa acquired LuxMed as a relatively small Polish business in 2007.
“After buying [LuxMed] we followed on with more than 10 add-ons and ultimately sold it for €400 million to the UK’s BUPA for €400 million in early 2013. Our strategy for Regina Maria will follow the same playbook.”
The Romanian healthcare sector has a number of similarities with the Polish market, Strassberg said.
“We are going into another unconsolidated market with very attractive organic and M&A opportunities. We want to be the nimblest and commercially aggressive of acquirers and over time, achieve critical mass which becomes highly compelling for future strategic acquirers.”
He contrasted the willingness to accept private investment in Poland and Romania’s healthcare sector with the UK’s current model.
“Both markets are very comfortable with private healthcare as a legitimate player in providing an overall solution to the society’s needs; this compares favourably to the controversy surrounding the legitimacy and desirability of private investment in supporting the NHS in the UK.”
“In Poland and Romania, it is accepted that approximately top 25 percent of earners go private, which is not seen as somehow unfair but rather as a way to reduce the pressure on the public system.”
Strassberg said that Regina Maria was already a key player in the sector and the Ponderas hospital acquisition would “solidify” its reputation as the leading player in Romanian private healthcare.
Strassberg said that Mid Europa was in discussions with “most major healthcare players” in the country to identify interested parties to join the Regina Maria platform.
Future deals will be a mix of high-end medical services and ancillary support services, he said.
“We expect to emerge with several more deals [for Regina Maria] including adjacent spaces like laboratories and imaging diagnostics.”
The model was attractive to strategic players like BUPA, looking to gain a foothold in new markets he said.
“When a company like BUPA shows up in a new market, it is hard for them to convince locals to pay the insurance premiums, unless they can point to a range of attractive facilities offering positive medical outcomes,” he added.
“So in the early stage of the healthcare market in countries like Romania, you will see this model of international private healthcare and insurance providers looking to buy into local medical infrastructure to control the delivery.”
Central and Eastern Europe specialist Mid Europa has around €2.9 billion of assets under management and has invested more than €600 million in healthcare services to date. Its other two focus areas are food retail and media and telecoms.
Among its healthcare investments are Alpha Medical and Diagnostyka, the largest lab test provider in the Czech Republic, Slovakia and Poland, as well as Kent Hospital, the largest private hospital in Turkey’s third largest city.