RoundTable raises $800m for healthcare

Healthcare reform in the US will create opportunities over the next five years, according to RoundTable co-chair Lester Knight.

RoundTable Healthcare Partners has joined the flood of healthcare-related funds that have closed this year – all poised to take advantage of the opportunities that arise from the reforms of the system in the US.

RoundTable, based in Lake Forest, Illinois, closed its third equity fund totaling $600 million, and its second subordinated debt fund on $200 million, the firm said this week. The sub-debt fund only invests in RoundTable’s equity deals.

The firm did not use a placement agent and managed the fundraising in just five weeks, Lester Knight, co-chairman of RoundTable, said in an interview. RoundTable mostly went back to its existing limited partners for the new funds, a group made up mostly of endowments, foundations and individuals.

Lester
Knight

The firm, which manages about $1.9 billion, makes growth investments in companies and partners with management teams. RoundTable targets areas in the healthcare industry, including medical devices, products and disposables, specialty pharmaceuticals, medication delivery systems, specialty distribution and outsources services.

RoundTable avoids investments in service-oriented providers like managed-care companies, hospitals or nursing homes.

Healthcare reform in the US will provide good opportunities for private equity, especially firms focused on products rather than services, Knight told PEO. Services are usually the first to take cuts because they receive direct government reimbursements, he said. And in the long term, the reformation of the healthcare system in the US is going to require cuts.

“If there’s cuts, generally the government just cuts the payments to the hospitals and doctors or the service providers,” Knight said. “Products and pharmaceuticals are part of the general budget that doesn’t get cut.”

Over the next five years, healthcare reform will make healthcare investing very attractive, he said.

“[Reform] will add volume, as more people get insured, they will use the healthcare system more,” Knight said. “Longer term, the system has a real problem of being too costly. We’ll have to figure out how to take cost out of the system, and that will affect everyone.”

RoundTable is just one of several firms that have successfully closed funds this year for healthcare investments. Linden, a Chicago-based healthcare-focused firm, closed its second fund on $375 million, and SV Life Sciences closed its fifth fund in late June with total commitments of more than $523 million.

Earlier this week, distressed investor Wilbur Ross announced he was prepared to spend more than $1 billion on a healthcare joint venture with former CVSCaremark chairman Edwin “Mac” Crawford. The JV will focus on services and distributions-related companies in the healthcare sector, rather than on companies that deal in products.

The healthcare reform bill in the US, which was signed into law by President Barack Obama in March, will require every person in the country to have healthcare insurance. The law is expected to eventually bring in 30 million new entrants into the US system.