Deal Mechanic IK GHD

As far as private equity is concerned, the German homecare market is looking fit as a fiddle right now. Thanks to the combination of an ageing population, technological developments and, of course, the increasing cost pressures faced by hospitals, there’s growing demand for medical products and specialist services that allow patients’ treatment to continue when they get home – even after serious operations.

“This kind of homecare service is growing a lot,” says Anders Petersson, a partner at IK Investment Partners. “When patients are offered the chance to recover in their home environment, they generally prefer it. And that’s really driving the market.”

In 2010, the London-based private equity group used its IK 2007 fund to acquire a majority stake in GHD GesundHeits, Germany’s leading provider of homecare services for patients with acute illnesses, reportedly for about €320 million. GHD’s nurses serve patients by delivering advice and supplying consumable medical kit that requires personal consultation. That could be anything from colostomy bags, to advanced wound care, to nutritional products.

When IK Invested in GHD, it already had eight bases around the country, with 900 nurses serving 110,000 patients. So the business was a good fit with IK’s favoured investment model.

“We always try to find a platform in a company you can really build upon,” says Petersson. “We take a leader in a sector and grow it by consolidation, add-on acquisitions, and working on the operations.”

Under IK’s ownership, turnover increased from €285 million in 2010 to €500 million in 2014. And according to Petersson, the principal growth drives were the extension of homecare products and services, and an expansion into oncology.

1. MORE NURSES, MORE PATIENTS

IK’s principal model for adding value to GHD was not particularly radical: put simply, it was to do more of the same.

The main role of GHD representatives is to be on hand to advise patients as soon as they come out of an operation, before they are sent home. As such, IK felt that a great deal of organic growth could be generated simply by having more nurses meeting more patients. As Petersson puts it: “We could continue to grow by leveraging the platform – by enlarging the patient base, and by providing these services to new clinics.”

Part of this process involved making some small bolt-on acquisitions of other local homecare competitors. All told, GHD now has a network of more than 1,100 nurses making home visits around Germany, and serves more than 140,000 patients – an increase of more than 20 percent in each case.

2. MORE PRODUCTS, MORE SUPPLIERS

Over and above GHD’s primary care function, the business essentially hinges on wholesale and logistics: its network of carers effectively represents a country-wide channel through which medical suppliers are able to distribute their goods.

So the second part of IK’s growth strategy was to broaden the range of products GHD supplied. “GHD has the base of patients, and is essentially the distributor of other people’s products,” says Petersson. He describes GHD as a “gatekeeper”, sat at the centre of a panoply of decision-makers. “You have policy-makers, hospitals, suppliers, patients and the people paying for it all – the statutory health insurers. And in the middle of all this there’s GHD – the provider of the service.”

Under IK, GHD extended its distribution network by signing new agreements with producers of enteral nutrition (aka tube feeding) supplies. Nestle and Abbott, for example, both now use GHD exclusively for their German distribution.

The net result was that GHD’s homecare business now represents around 75 percent of the company’s sales.