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FTV's Alex Mason weighs in on PE hold time and the direct lender space

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Photo illustration: Gabriella Turrisi/Axios. Photo: Courtesy of FTV Capital

FTV Capital is optimistic about sponsor-led dealmaking in health care as non-traditional financing sources continue to flood the market in 2024, partner Alex Mason tells Axios.

Why it matters: Interest rate cuts may be coming, which investors are hoping opens the door for more PE-led exits and investments.

Axios spoke with Mason as part of the Expert Voices series. This interview was edited for length and clarity.

What will the buyer breakdown look like?

  • "There's definitely a lot more chatter and ... movement with some of the pretty scaled assets. I think people have sort of been on the sidelines long enough. ... There's enough liquidity desires on either side to get things going. We'll see if the IPO window holds, or even opens.
  • Especially with the more mature health care IT, health care services assets, there should be continued interest from the PE world as an acquirer as opposed to strategics. Not to say there won't be strategic interest, but I think that has really buoyed some deal flow that we probably didn't really see it in 2023 and I think that will pull through and 2024."

What are the most attractive sub-sectors to you right now?

  • "We're seeing a lot of innovation on what we think about AI clinical decision support. ... The algorithms — we've seen a lot in radiology in particular, image-based — how do we enable sort of more efficient workflow for the radiologist or clinician? How do we help them make better, faster, or more efficient?
  • RCM is not dead and we think the revenue cycle is still alive and well. That is a really big market and a really big problem. We hold it near and dear to our hearts.
  • There is also this ongoing intersection of self-insured employers wanting to control more of the health care cost ... We're seeing the rise, I'd say, of the importance of the TPA, which is really, processing and adjudicating claims. It's the rails that self-insured employer uses. You saw Health Comp and Virgin."

What's the 2024 financing outlook?

  • "I personally just don't see the traditional lenders coming back anytime soon. There is just an ongoing ripple through the system of SVB and other dynamics and therefore, regulatory activity is really impacting underwriting.
  • I'd say in particular with lenders in health care, what we do see is folks have domain and regulatory knowledge of and comfort with businesses can really drive a lender's unique position in the marketplace.
  • So I think that scares away the tourists' side (not traditional lenders), which is probably a good thing because those businesses do need to get, financing as part of buyouts or growth capital side."
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