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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

This week we're speaking with Francisco Partners partner Chris Adams on how he sources — and wins — carveout deals.

Why it matters: Sponsor-to-sponsor M&A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

How does Francisco Partners' approach to corporate carveouts differ from your peers?

"If I think about most of our carveouts, they're businesses that we looked at years and years ago — often looked at before the current corporate owner had bought them. And so if the time ever comes when that corporate parent thinks, 'This is no longer strategic, or doesn't fit with where I'm going now,' we don't have two months or three months or six months of history, but we have five years or 10 years of history.

I think longevity in this space is a part of this. If you're a big corporate parent selling what is, for you, a small division — even if it's a big business for us —  there's a lot of things that go into that that aren't just price. For example, you probably still have shared customers that you're going to have in that division for a long time. There's going to be some brand transition most likely of some kind. How you treat those employees that were former employees of the corporate parent who are going to be go-forward employees of your company matters a lot."

What does FP's carveout pipeline look like for the rest of this year?

"With any deal, it's super hard to know until like you actually sign on that dotted line. And the same is true — probably even more so — with carveouts. There tend to be more decision-makers at the corporate that get involved and people can change their minds at the end. So the pipeline is super promising, but you never know until you know.

If you go back to the beginning of COVID ... there was a big wave of both investor interest but also M&A and strategic interest in health care tech in 2020 and 2021, where it was almost like, 'No price is too high  ...' and so a lot of people entered health care that hadn't been in before.

A lot of times when that happens a year or two later, people then realize, wow, health care technology is a little bit different. ... There's still long-term tailwinds that are going in health care technology. And so sometimes corporates are like, 'Well, there's still a good tailwind, we'll eventually figure it out.' But what has happened in past cycles, and you see certainly some of it happening now, is people saying, 'This is just different from what I'm good at. And so I'm not the best owner for this business.'"

Do you feel pressure from LPs to return money to them through an exit? Has your playbook changed with many sponsors still on the sidelines while debt remains expensive?

"Our investors are, I think, very patient and smart and don't need us to do anything unnatural to have capital come back to them sooner or in unnatural ways.

The past 15 years that we've been in health care have almost always resulted in a strategic looking to invest in our health care companies. So I wouldn't say that really changed lately."

Expert Voices: Francisco Partners' Chris Adams talks carveouts

Sponsor-to-sponsor M&A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

portrait of Chris Adams of Francisco Partners surrounded by circles and binary code

Photo Illustration: Tiffany Herring/Axios, Photo: Courtesy Francisco Partners

Health tech deals

This week we&#x27;re speaking with Francisco Partners partner Chris Adams on how he sources — and wins — carveout deals.Why it matters: Sponsor-to-sponsor M&amp;A activity has slowed significantly, but private equity is finding deal opportunities in strategic divestitures.

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Expert Voices: Francisco Partners' Chris Adams talks carveouts

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