Expert Voices: VSCP's Adam Feinstein on deal structures and dances with strategics
Private equity sponsors are finding creative ways to get health care deals done, in the midst of a muted market, says Vesey Street Capital Partners managing partner Adam Feinstein.
- This interview was lightly edited for length, style and clarity:
How do you characterize today's deal structures?
- Groups are using less leverage and owners of the business are rolling over additional equity so that the equity checks can be smaller. I think this pattern will continue for the next couple of years.
- In the past, there could be ways you could financially engineer your way to a great outcome by putting 7x to 10x leverage on the deal, but those opportunities are going to be hard.
- A lot of the transactions we are seeing today were very prevalent back in 2006 and 2007. After the great financial crisis, more deals were being completed where there was only one firm involved.
What are some sub-sectors of health care you're investing in and why?
- We like health care logistics and distribution businesses, as there are a lot of challenges in these areas which really came to the forefront during COVID. Every health care organization — hospitals, physicians, pharmacies, they're all looking for more and more help.
- We're doing a lot of work in areas that deal with the health care supply chain, drug, and medical supply distribution companies.
- Utilizing technology to help, while also not displacing clinicians, is very prominent today, and so there is a very big demand for companies that can help around health care labor.
- We're not necessarily looking to invest in the traditional larger staffing companies, but we're looking for more specialized staffing plays that provide labor to other parts of the market.
How have you seen strategic buyers behave in the current market?
- Strategics are more open to partnering with private equity firms than ever before, and it's a function of the institutionalization of the private equity industry. Not to mention, it's great for both parties. The strategic gets a toe in the water while the private equity firm can do a lot of the real heavy lifting.
- Being seen as a strategic partner to these organizations means you're having a very particular sort of dialogue.
🍕 One fun thing: A pizza aficionado, Feinstein's favorite NYC slice is Una Pizza Napoletana and his favorite overall 'za is from DeLorenzo's Pizza in Trenton, NJ.