All Access

Health Tech Deals

Health Tech Deals Alerts

Alert

Standard

Health Tech Deals Thought Bubble

Thought Bubble

mustard

BFD Expert Voices - Health Tech Deals

BFD Expert Voices

While the expense of debt has slowed the pace of leveraged buyouts, the lower middle market has seen a pickup in dealmaking, Aaron writes.

That's according to Grant Avenue Capital managing partner Buddy Gumina. He spoke to Aaron recently about M&A opportunities in that market.

This interview was lightly edited for length, style and clarity.

How does Grant Avenue differentiate its approach when it comes to carve-outs?

We consistently give the seller a price and a timeline, and then hit the price and beat the timeline.  That is why we have completed seven carve-outs in the past few years.

We work with seasoned operating executives to move smoothly through the diligence process while being flexible and cooperative.  This approach has created credibility and reference ability for future transaction sourcing.

By definition, carve-outs have been noncore to their parent companies, with limited capital investment. By leveraging our Grant Avenue growth playbook, we focus on key initiatives to drive value immediately post-carve-out

What subsectors of health care are you most excited about?

While we do not expect to invest in hospitals, skilled nursing facilities, or other heavy facility-based businesses, we are bullish on investing in tech-enabled organizations that are strong outsourced partners to those kinds of businesses.

When we carved out Ovation Healthcare, we were targeting an opportunity around outsourced services to hospitals, and we networked to this division within Quorum Health, a hospital operator.

In addition, we target sectors that provide outstanding patient care but also reduce overall health care costs.  To that end, we carved out a physical therapy business from a large skilled nursing provider.

In assessing a sector, we use our "core four" framework: 1) Are there strong sector tailwinds; 2) Is there meaningful market fragmentation; 3) Can we partner with a seasoned sector executive; and 4) Is there exit multiple arbitrage?

How are you navigating financing headwinds?

Firstly, lower-middle market health care remains a resilient sector.  Also, our deal flow has been less impacted by debt market volatility because we've historically been very conservative on leverage; in fact, three of our four platforms started with no leverage.

We are reasonably good at math and understand that, on the surface, leverage in a buyout mathematically could have a positive impact. However, we believe that implementing our growth playbook early in a deal, which involves investing in areas like human capital, technology, and standing up an M&A tuck-in program, will have a bigger impact on equity value creation over time when compared to initial financial engineering.

🍔 One fun thing: What is your favorite NYC restaurant?

My wife and I enjoy having dinner at the bar at Gramercy Tavern. It's a great restaurant, but it's also a fun ambience that we love.

1 big thing: Expert Voices: Talking lower market M&A with Grant Avenue's Buddy Gumina

a photo of buddy gumina of grant ave capital next to a collage of circles and glowing health pluses 

Illustration: Tiffany Herring/Axios; Photo: Courtesy Grant Ave 

HerMD, a Cincinnati-based women's health provider, raised an $18 million Series A-1 round to grow its geographic footprint and virtual care offerings, CMO Somi Javaid tells Aaron.

Why it's the BFD: HerMD focuses on treating menopause, an area of women's health tech that's attracted significant investor dollars as more awareness is drawn to the condition.

Details: The round was led by existing investor Jazz Venture Partners.

The round also saw participation from B-Flexion and Amboy Street Ventures.

This new investment brings HerMD's total funding to nearly $30 million.

How it works: HerMD offers comprehensive women's health care under one umbrella via in-person and virtual care offerings, with an emphasis on menopause and sexual health care.

All appointments last between 20 and 60 minutes and all medical services are insurance and Medicare based.

On the platform is HerMD University, where training and education are given to providers — something Javaid says is needed in the field.

What's next: Over the next few months, HerMD plans to open additional locations in the New York metro area and in Nashville.

The company has four locations and Javaid says waitlists for its brick-and-mortar locations are typically at least 500 patients.

"Our runway is a lot longer than a year but I anticipate probably fundraising again in about a year or so," she says. "Before fundraising, we were profitable, so we know that this business model works, now it is just a matter of deciding how much growth to go for."

What they're saying: "We have long believed in HerMD's mission to bring menopause and sexual healthcare to women through evidence-based treatment options," says Jazz partner Sharon Knight in a release.

Zoom in: "Our original two clinics were profitable but then we went into growth mode to expand and build more clinics," Javaid says.

She noted that historically, the clinics break even within nine months of opening.

"There are operational levers we can pull on our path to profitability," she adds, noting HerMD wants to focus on improving its reimbursement rates.

State of play: Women's health startups last year attracted a total of $1.16 billion, twice the amount they raised in 2020.

Virtual women's health company Iron Health raised $4.5 million in March.

Evernow, a telehealth company focused on perimenopause and menopause, collected $28.5 million from a cadre of venture capital firms, tech executives and celebrity backers in April 2022.

Consumer women's health business Intrinsic raised $15 million in May.

2. The BFD: HerMD nets $18M to expand menopause services

Illustration of a female symbol and a red cross merged together.

• Entia, a British remote cancer monitoring company, raised $20m in Series A funds led by BGF and Parkwalk Advisors. https://axios.link/3OgQQx7

• Airvet, a California pet telehealth startup, raised $18.2m in Series B funding led by Mountain Group Partners with participation from Canvas Ventures, Headline, Burst Capital and individual backers including VCA Animal Hospitals founder Bob Antin, bringing total funding to $33m. https://axios.link/3rP7a0R

• Hippocratic AI, a health care-focused generative AI startup, raised $15m, bringing total funding to $65m since it launched in May 2023. https://axios.link/3YbW4iv

• FeelBetter, a Tel Aviv-based AI medication management startup, raised $5.9 m in Series A funding led by Firstime Ventures and Shoni Health Ventures. https://axios.link/3qa5wpQ 

• BrainTale, a French developer of software designed to monitor brain disease, raised $4.9m from Capital Grand Est and MACSF. https://axios.link/451C6cc 

• Sanguina, a Peachtree Corners, Ga.-home lab testing startup, raised $2.8m in Series A funding led by Veritus Holdings with participation from Seed Lab's George Hornig and Veritus' Stephen Ippolito. https://axios.link/3Qg4WS3

• BPEA EQT, a Hong Kong-based PE firm, acquired a controlling stake in Indira IVF, an Mumbai, India-based provider of fertility services, from TA Associates. https://axios.link/3DDeUW0 

• Apax Partners is in talks to buy a 50% stake in Spanish med-tech distributor Palex at around a €1b enterprise value from Fremman Capital, per Reuters. https://axios.link/3KniW8R

3. Deals o' the day

• Matthew Rioth left a post as VP of cancer informatics at Syapse to become head of clinical product development at Paradigm.

• Tom Hills was promoted from chief growth officer to EVP of client engagement at Laudio.

• Sergey Vasilenko left a post as a director at Emerge Medical Data Intelligence to co-found In-House Health.

• Sam Brasch left a post as senior managing director at Kaiser Permanente Ventures to become partner at HealthQuest Capital.

• Subhabrata Mukherjee left a post as principal researcher at Microsoft to become co-founder and chief scientific officer at Hippocratic AI.

• Brendhan Green left a post as chief partnerships officer at Galileo to take the same role at Octave.

• At Headspace, Karan Singh was named chief people officer and will maintain his role as COO, while Christine Hsu Evans was promoted from chief marketing officer to president. 

• Nick Richitt left a post as global co-head of health care banking for Deutsche Bank to become head of health care services banking at JPMorgan.

4. It's Personnel

📜 Senate Finance advances bipartisan PBM bill — Axios

🔬 Clinical pathways are the currency of health tech — TechCrunch

🏥 Informa to buy HIMSS global health conference — Fierce Healthcare

5. Your daily dose

Illustration of a pill capsule as the bell hammer on an alarm clock.

🦐🍔 Aaron stuffed his face all weekend (what else is new) with all-you-can-eat Japanese barbecue and Au Cheval (but the original Chicago location is better).

🏆 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

July 31, 2023

1 big thing: Expert Voices: Talking lower market M&A with Grant Avenue's Buddy Gumina