Axios Pro: Health Tech Deals

March 18, 2022

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Happy Friday, Health Tech readers.

✈️ Situational awareness: Erin is finally on her way home after a packed week at HIMSS, where the exhibition floor was crowded with look-alike vendors selling electronic health records and patient-messaging tools.

  • One takeaway: Entrepreneurs are placing a renewed focus on the unsexy parts of health care — from infrastructure tools that power custom health plans to automation software that boosts health workers' efficiency.

1 big thing: Spreading the wealth

Illustration: Gabriella Turrisi/Axios

InTandem Capital Partners is reinventing how its equity gains are shared across the health care companies it invests in, unveiling its “Private Equity for Greater Good” program, Sarah writes.

Why it matters: The income and wealth inequality gap remains elevated, per February’s Morning Consult/Axios Inequality Index, and private equity firms, having invested in 16,000-plus companies as of 2020, according to the AIC, are well-situated to drive meaningful impact.

  • Senior executives of portfolio companies typically reap the benefits of equity value creation, but InTandem says its program extends the spread of wealth by rewarding all portfolio company workers.

Between the lines: LPs are game for programs of this vein, and are pressuring the GPs to play catch up.

  • “I am focused, especially in today’s political and social environment, on improving the sustainability of investment performance by increasing alignment across stakeholders,” says Jennifer L. Heller, president of Brandywine Group Advisors, a longtime InTandem LP.
  • Nearly half of LPs believe that offering performance-based incentives to a larger proportion of portfolio company employees would over time improve private equity’s investment returns, per a recent Coller Capital report.

State of play: Few PE firms have existing initiatives in place, but there are a couple of exceptions.

  • KKR’s profit-sharing program for all industrials portfolio companies dates to 2011.
  • Leonard Green & Partners last fall said it had shared more than $2 billion in 2021 with employees of companies it backs, per Bloomberg.

Zoom in: InTandem isn't only applying the program to its umbrella of investments; it’s encouraging all private equity and alternative investments firms to join in on the effort.

  • The New York health care services PE shop will make materials available to other firms interested in participating, with its counsel Goodwin Procter committing to administer the program at no cost to those parties.
  • InTandem will distribute 5% of investment gains to all portfolio company employees that do not otherwise hold equity instruments.

The bottom line: Private equity firms, with some $5 trillion in assets under management, have an opportunity to narrow the wealth gap. Giving stock to workers is one step in the right direction.

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