Private Equity Newsletter

n
t
ditio
1s E
Private Equity Newsletter
1st Semester 2008 Review
Bionest Partners
19 rue du Général Foy
75008 Paris
France
Tel: +33 1 58 05 14 00
Tower 49, 12th floor
12 East 49th Street
New York, NY 10017
USA
Tel: +1 (646) 386 2900
Private Equity Transactions
► Sharp decline in European Transactions
Is healthcare a defensive sector?
Europe
Page 2 and 3
► Shift from Industry to Services
Page 2 and 3
in the Healthcare sector
Europe
► S1 2008 Private Equity deals in Healthcare
Page 4
Europe
► 2nd Semester Preview
Europe
Page 5
► Private Equity Opportunities in the Middle East
Middle-East, North Africa
Page 6 and 7
► Fact Sheet (Buy Out Transactions in Healthcare)
Page 10
Europe
Alain J. Gilbert
Managing Partner
[email protected]
Bionest Transaction Services
► From transaction to exit, Bionest Partners
Thomas Martinelli
Manager
[email protected]
Nicolas Brodetsky
Associate Manager
[email protected]
Page 8
can help you
► Bionest Track Record
Page 9
► Bionest Transaction Team
Page 11
Private Equity Transactions
Sharp decline in European Transactions – Is healthcare a defensive sector?
Sectors Distribution (Europe)
Total Buy Out Deal Amounts (Europe)
€m
120 000
Healthcare sector
9%
Healthcare sector
100 000
16%
80 000
91 042
60 000
€108bn
€43bn
60 613
40 000
39 329
20 000
Other sectors
Other sectors
91%
84%
16 958
10 387
3 671
0
S1 2006
1st
1st
Semester 2007
Semester 2008
S1 2007
S1 2008
Healthcare sector
Other sectors
Source : Private Equity Insight, Merger Market, Candover, Bionest Partners Analysis
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
Target Country Evolution (Healthcare deals)
Others
19%
Acquirer Country Evolution (Healthcare deals)
UK
42%
Others
24%
UK
38%
Others
25%
UK
37%
UK
42%
Others
24%
Sweden
6%
48 deals
Spain
2%
Italy
2%
Germany
6%
Sweden
10%
Italy
3%
Germany
7%
Germany
13%
France
21%
1st Semester 2007
Germany
3%
48 deals
29 deals
US
17%
US
10%
France
14%
France
14%
France
21%
1st Semester 2008
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
29 deals
1st Semester 2007
1st Semester 2008
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
HealthCare Sector Distribution (Number of Deals)
Pharmaceuticals
29%
Health Care Provider
34%
Medical
Supplies
3%
48
deals
Health Care Provider
45%
Pharmaceuticals
21%
29
deals
Medical
Supplies
8%
Medical Equipment
29%
Medical Equipment
31%
1st Semester 2007
1st Semester 2008
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
1st Semester 2008
Page 2 of 12
Private Equity Transactions
Healthcare, the perfect defensive sector…
Private Equity funds have been in the spotlight since 2004 and have had an
incredible expansion since then. By the second half of 2007, private-equity deals,
who, many of which, depend heavily on debt leverage, have drastically decreased.
Even though Healthcare has been hit harder than its peers, it has potential to
resist or even expand better than others. It is able to benefit from multiple
drivers…
Primarily, due to a demographic push, the industry is a necessity which
places providers in a strengthened position, as such, they do not have
to face cyclical demand issues. Moreover, an acquisition in the
healthcare industry is often accompanied by a significant property
portfolio. Property holdings permit easier access to credit as they bring extra
security for bankers. A lender will look at these assets and be able to apply a
higher debt multiple than non asset backed deals.
Another factor to take into account is the sector’s visibility. Companies in
the Healthcare sector are known for having long and visible pipelines.
These are very important to lenders as they can see the direction of the firm
for a short- to medium-term horizon. This will enable easier access to credit
and make lenders more comfortable. Of course, management’s track records
will be carefully analyzed, in order to assess their ability to transform those
pipelines…
Finally, the increasing cost burden of care provision has become an important
issue at every level, from government to corporate employers. Private
investments is needed across the entire healthcare value chain in
order to transform our systems into efficient organizations that
create both value for the patient and for the shareholders.
… is shifting from industry to services !
A major shift in the type of Private Equity deals has been confirmed in 2008 in the
European Healthcare sector. Basically, they are switching from industry to
services. This is consistent with the former statements and highlights the current
dynamism of healthcare service sector in Europe. Indeed, demand for healthcare
service providers is increasing due to demographic factors, such as an ageing
population. Similarly, medical equipments represent 30% of total deals in
2008, however, they are characterized by much smaller deals than in 2007.
Other sub-sectors are experiencing a less attractive phase such as the European
Pharmaceutical one, which has been developing in cost-efficient emerging countries.
Also, biotechnology firms encountered less private equity activity due to a
lack of visibility and high R&D needs which cools down investors in this
unsteady period.
1st Semester 2008
Page 3 of 12
Private Equity Transactions
29 deals in the European Healthcare sector during the first semester of 2008
Target Company
Sub Sector
Value €m
Target Country
Acquirer
June 2008
Euromedic International NV
Health Care Providers
800
Hungary
Merill Lynch Global PE / Ares Life Sciences
Groupe Amplitude
Medical Equipment
ND
France
Weinberg Capital Partners
Pharmaceuticals
20
UK
Meyersyside Venture Fund
May 2008
Vitaflo International Ltd
April 2008
Healthcare Homes Group Ltd
Health Care Providers
95
UK
Bowmark Capital
Alloheim Senioren-Residenzen AG
Health Care Providers
80
Germany
Star Capital Partners
Centrum Medyczne Lim
Health Care Providers
ND
Poland
Mid Europa Partners
Sia International
Pharmaceuticals
509
Russia
TPG
30
France
Capzanine
March 2008
Assistances Médicales Spécialisées
Medical Equipment
LaborMed Pharma
Pharmaceuticals
123
Romania
Advent International
Premier Research Group Plc
Pharmaceuticals
127
UK
Pegasus Bidco Ltd / (ECI Partners & Indigo
Capital Ltd)
Societe Civile d'Investissement Medico-Chirurgical
Health Care Providers
20
France
Almaviva Sante
Summit Medical
Medical Supplies
47
UK
Riverside Company
Tissue Science Laboratories
Pharmaceuticals
45
UK
Covidien UK
Dedienne Santé
Medical Equipment
6
France
Turenne Capital Partenaires
DPNova
Health Care Providers
ND
Sweden
Dentutech and Ambertank
Olivia Group
Health Care Providers
ND
Sweden
Procuritas Partners
Premier Medical Group
Health Care Providers
ND
UK
Nomura Securities
Stanmore Implants
Medical Equipment
17
Uk
Abingworth Management Ltd
Tunstall Group
Health Care Providers
683
UK
Charterhouse Capital Partners
Ultralase Ltd
Health Care Providers
232
UK
3i
Verna Group
Medical Equipment
ND
UK
Bank of Scotland Corporate
Active Pharmaceuticals Ingredients
Pharmaceuticals
269
Norway
3i
Bionostics Plc
Medical Equipment
20
UK
JO Hambro
Ibis Holding
Health Care Providers
18
Italy
Efibanca Palladio Finanziaria
Acibadem
Health Care Providers
89
Turkey
Almond Holding AS
Chezara Chernigov
Medical Equipment
10
Ukraine
Arca capital Slovakia A.S.
Human Care
Medical Equipment
30
Sweden
Garden Growth Capital Health Care
February 2008
January 2008
Integrated Dental Holdings
Health Care Providers
401
UK
Merrill Lynch
Zett Optics GmbH
Medical Equipment
ND
Germany
Ventizz Capital Partners
Total Transactions value (7 deals undisclosed)
Average Deal Amount (7 deals undisclosed)
3671
167
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
1st Semester 2008
Page 4 of 12
Private Equity Transactions
2nd Semester driven by private clinics and clinical diagnostics ?
Private
Clinics
Vitalia was expected to be one of the most important private equity
transactions of the year. Blackstone expected to divest the business for
about €1.1bn to €1.3bn. Selected bidders for the second round included
French buyout shop LBO France, London-based CVC Capital Partners,
French real estate firm Batipart and Italian hospital operator Gruppo
Ospedaliero San Donato.
Vitalia has expanded rapidly through bolt-on acquisitions. Blackstone has
invested about €900 million in its two years, buying 46 clinics that
collectively generated sales of about €600 million in 2007.
Preliminary offers did not meet expectations (due to a rapid process in a
challenging debt financing environment), thus Blackstone aborted
discussions with final bidders. However, corresponding valuation
multiples of Vitalia raised interests for funds to divest their current
assets. For the remaining ones, it might have renewed
attractiveness of building such a network from scratch…
3i has been particularly active in the European Healthcare sector over the
last few years.
Clinical
Diagnostic
With the largely mediatized €140m investment in Labco, a European
network of diagnostics labs, followed by the divestment of Sampletest (a
private Spanish-Portuguese clinical analysis laboratory group) to Labco, 3i
has spurred growing interest in the clinical diagnostic laboratory sector
among its peers. The clinical diagnostics sector in France has always been
attractive to PE funds, however limited to specialized labs such as Cerba
and more recently Biomnis. A possible deregulation could prompt a
much higher volume of transactions on routine laboratory
transactions…
Focus on the fast moving strategies of the clinical diagnostic sector in France
Current
situation
Specialized Labs
2 leaders on the French market
Mid-size Labs– Full Service
Small Labs
Most of them are structured as SEL (groups of
laboratories)
Majority of the existing labs (in number)
6% of the total market
Approx 69% of the market
Approx 25% of the market
Main customers: routine labs
Full service for routine analysis
Decreasing profitability
Decreasing margins
Economies of scale
Highly Threatened segment
Low profitability
Organized as private practices
+
+
Key areas to
investigate–
Potential evolution
Likely
evolution
Current factors could threaten
specialized labs position
Targets for financial investors
Decreasing reimbursements
Sub contracting Full Service
Decrease of the economy of scale -> New
technology
Is their
technological
monopoly
threatened
by mid-size
labs ? Market
share
decrease ?
Would it
make sense
to build a
vertical lab,
integrating
routine labs
and thus
competing
with their
clients ?
Would it
make sense
to build a
paneuropean
specialized
platform ?
Economies of
scale still
possible ?
+
Evolution of regulatory framework
will prevail in the near future
Consolidation movement in progress
(e.g. Labco)
New regulation
Decreasing reimbursements
Delocalized Biology
What will be
the impact on
margins of the
decrease of
the « B », the
index that sets
analysis
prices?
1st Semester 2008
Page 5 of 12
Will the new
regulations
allow sufficient
consolidations
in order to
enable
economies of
scale and thus
improve routine
labs margins?
New regulations could lead to
a major strategy change in small labs
Consolidation movement in progress
New technologies unaffordable for those labs
Delocalized Biology
Unavoidable
market share
decrease ?
Conversion
of small labs
into pure
collection
centers ?
Private Equity Transactions
Private equity opportunities in the Middle East
PE investment boom in the MENA region
Cummulated PE amount invested in the MENA region
$m
19 640
20 000
18 000
16 000
13 717
14 000
12 000
10 000
8 000
6 642
6 000
4 000
2 000
1 942
1 257
132
210
2000
2001
0
2002
2003
2 263
2004
2005
2006
2007
Source : Worldbank, IMF, Bionest Partners Analysis
1st Semester 2008 Private Equity deals in Healthcare (Middle East)
Date
Target Company
Target
Country
Sector
Value $m
Fund
Country
Fund
2008
June 2008
Amoun Pharmaceuticals Company
Egypt
Healthcare provider
ND
Coral Growth Investment Ldt
Funds
US
May 2008
Cairo Medical Tower Laboratory
Egypt
Healthcare provider
ND
Egypt
March 2008
Planet Pharmacies LLC
UAE
Pharmaceuticals
108
Egyptian Direct Investment
Fund Ltd
Global Opportunistic Fund II
Global Buyout Fund L.P.
March 2008
Arab Pharmaceutical
Manufacturing Company
Jordan
Pharmaceuticals
ND
EuroMena Fund
UK
January 2008
Saudi Tadawi Company
Saudi Arabia
Pharmaceuticals
177
Abraaj Buyout Fund II
Saudi Arabia
Source : Zawya, Bionest Partners Analysis
Size of PE funds in the region
Main countries of PE investment (MENA)
Big PE (>$2bn)
Other
41%
29%
Egypt
37%
Small PE (<$1 bn)
42%
$19,7 bn
$19,7 bn
Saudi Arabia
15%
UAE
19%
Mid-sized PE ($1bn<x<$2bn)
17%
Source : IRR Middle-Eastc, Bionest Partners Analysis
Source : Bionest Partners Analysis
1st Semester 2008
Page 6 of 12
Kuwait
Private Equity Transactions
Private Equity investment boom in the MENA region…
Despite the credit crunch on financial markets in the rest of the world,
the private equity sector in the MENA region has recorded a 43%
growth in 2007 and is set to witness unprecedented growth in the
coming years. The active deployment of funds by institutions,
sovereign wealths and high net-worth individuals combined with a
prolonged low interest rate environment makes both cost and
availability of funds attractive.
Great private equity opportunities exist in the region, sustained by
several factors. Among them, the fast economic growth and the
structure of businesses: 90% of the GCC commercial activity is
controlled by family enterprises which are becoming more open to
private equity participation who have been known to create additional
value. Furthermore, regional governments are keen to privatise: 223
privatisations in MENA are planned for the next 10 years for a
value of over $1tr.
A rising number of international private equity funds are rushing
towards the MENA region, to quote last months’ newcomers:
Citigroup, Lehman Brother, UBS and Deutsche Bank. Carlyle Group,
HSBC, and Swicorp have been in the region for several years now.
… will offer multiple opportunities in the growing healthcare sector
Within this region, the healthcare sector seems to show the
most promising future.
With rising prosperity comes sedentary lifestyles but, also, sugar and
fast-food based diets. As a result of this, the region’s population has
encountered major health problems. Non-communicable diseases, in
general, are on the rise in the entire MENA region. Today, these
represent 45% of all diseases and they are expected to
increase to 60% by 2020, explained, primarily, by the
increased use of tobacco and the new unhealthy lifestyles.
However, the MENA region, though very heterogeneous among
countries, encounters an overall under-supply in the healthcare sector
(2.1 hospital beds per 1000 people in the GCC countries versus 6.1 on
average in the OECD countries). Thus, the current healthcare market
size of $17bn is expected to grow to $60bn by 2025, supported by an
an ageing and growing population.
Massive investments will be needed across the entire
healthcare value chain to keep pace with the booming demand;
the region offers tremendous opportunities for private equity
funds.
1st Semester 2008
Page 7 of 12
Bionest Transaction Services Capabilities
Bionest partners supports PE funds throughout the transaction process
Red Flag
Analysis
Commercial
Due Diligence
Market
Assessment
Business Plan
Assessment
Preliminary
Valuation
Financial
Valuation
PRIVATE EQUITY
Vendor
Assistance
INVESTMENT
INVESTMENT CYCLE
CYCLE
Vendor
Due Diligence
Strategic
Planning
Post Merger
Integration
Target
Identification
Buy-Side
Due Diligence
Build-Up
Strategy
Performance
Improvement
Why choose Bionest for your life sciences transactions ?
Exclusive focus on the life sciences sectors
Unique combination of finance and strategy skills
Premium access to world-renowed experts
1st Semester 2008
Page 8 of 12
Bionest Selected Transaction Assignments
2008
2008
2007
2007
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
for
for
for
for
Tier 1 Private
Equity Fund
2007
2006
2006
2006
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
for
for
for
for
2006
2006
2006
2006
Commercial Due Diligence
Commercial Due Diligence
Commercial Due diligence
Commercial Due Diligence
for
for
2006
for
for
2003
2003
2004
Animal Health Player
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
Commercial Due Diligence
for
for
for
for
Bionest Partners can provide you with necessary insights
for assessing value creating deals…
1st Semester 2008
Page 9 of 12
Private Equity Transactions
Fact Sheet (Buy Out Transactions in Healthcare – Europe)
Pharmaceuticals*
Private Equity Deals Value
€m
7 000
Deal Size Evolution
Target Country in 2008
€m
800
5 975
6 000
US
17%
Norway
17%
Russia
17%
747
Acquirer Country in 2008
700
600
5 000
500
4 000
Romania
17%
400
6 deals
6 deals
3 000
300
2 000
1 093
1 000
S1 2006
182
100
273
0
200
46
S1 2007
S1 2008
0
S1 2006
S1 2007
UK
49%
S1 2008
UK
83%
* 7 deal amounts disclosed
Healthcare providers*
Private Equity Deals Value
€m
7 000
Target Country in 2008
€m
800
6 484
Hungary
8%
600
5 000
557
500
3 934
2 417
2 000
269
Sweden
15%
100
S1 2006
S1 2007
S1 2008
0
UK
38%
13 deals
Italy
8%
France
8%
200
1 000
0
300
France
8%
Saudi Arabia
8%
13 deals
400
3 000
Japan
8%
UK
37%
Germany
8%
499
Acquirer Country in 2008
Italy
8%
Poland
8%
700
6 000
4 000
Deal Size Evolution
Sweden
15%
S1 2006
S1 2007
S1 2008
US
15%
Turkey
8%
* 9 deal amounts disclosed
Medical Equipment*
Private Equity Deals Value
€m
7 000
6 000
Deal Size Evolution
Target Country in 2008
€m
800
6 048
500
3 465
11%
France
33%
600
4 000
Scotland
Ukraine
11%
700
5 000
495
US
11%
9 deals
3 000
300
100
113
0
S1 2006
S1 2007
S1 2008
0
9 deals
UK
34%
200
1 000
France
34%
Germany
11%
504
400
2 000
Acquirer Country in 2008
19
S1 2006
S1 2007
Germany
11%
S1 2008
Slovakia
11%
Sweden
11%
UK
22%
* 6 deal amounts disclosed
Medical Supplies*
Private Equity Deals Value
€m
1 200
Deal Size Evolution
Target Country in 2008
Acquirer Country in 2008
€m
800
1 034
700
1 000
600
800
500
600
400
1 deal
345
1 deal
300
400
200
200
132
47
0
S1 2006
S1 2007
S1 2008
100
0
33
S1 2006
47
S1 2007
S1 2008
* 1 deal amount disclosed
UK
100%
US
100%
Source : Private Equity Insight, Merger Market, Bionest Partners Analysis
1st Semester 2008
Page 10 of 12
Our Transaction Team Management
Alain
J. Gilbert
– Managing
Alain
Gilbert
Partner Partner
Before co-founding Bionest in 2003, Alain was European Founding President of Biogen Inc, (BGEN) where he was
responsible for the launch of Avonex®, a biotech breakthrough treatment for MS. He held several position at senior
management level such as European founder of IDEXX Labs Inc.,(IDXX) involved in veterinary diagnostic, water
and food contaminant testing products, President of Medtronic Europe, world leader in cardiovascular devices
(pacemakers, valves, etc.). Alain started his career in sales and marketing at Abbott's Diagnostic Division and
remained there for 17 years, holding key executive positions in the US and in Europe. At Bionest, Alain is mostly
involved in Biopharmaceutical, Animal Health, Product Launch, Private Equity and very focused on USA.
Thomas
Thomas
Martinelli
Martinelli
- Manager
- Manager
Thomas has over 5 years of consulting experience at Bionest where he has been involved and/or managed over
40 projects ranging from strategic positioning, business planning and strategic due diligences for a wide range of
clients. In Animal Health, Thomas handled several assignments since 2005, most significant being Ceva Santé
Animale (Candover bid), Merial (Candover/PAI/JP Morgan bid), Phibro (3i equity stake investment) and Vetoquinol
(support in the IPO process). Before joining Bionest, Thomas gained experience at Genopole Evry, and at the French
Trade Commission in Toronto, Canada. Thomas has a Master’s in Life Sciences and Management from ISTM (Paris).
Nicolas Brodetsky
– Associate
– Associate
Manager
Manager
Nicolas joined Bionest in 2007 as a senior consultant where he has been involved in commercial due diligences for
private equity firms, most significant being Vitalia and Phibro Animal Health (3i equity stake investment). Before
joining Bionest, Nicolas was a senior consultant in the Transaction Services department of Ernst & Young, where
he has been involved and in charge of due diligences for major transactions in various specialties (Healthcare, Energy
and Distribution). Nicolas has a Master in Management from GGSB (Grenoble Graduate School of Business) with a major
in corporate finance.
Disclaimer
This publication has been prepared by Bionest Partners (19 rue du Général Foy – Paris, France) and is provided solely
for the information of the recipients who are expected to make their own investment decisions without undue reliance
on this report. The information herein is not intended as an offer to buy or sell, or a solicitation to buy or sell any
financial instrument. The information herein has been obtained from, and any opinions herein are based upon,
sources believed to be reliable, but Bionest Partners makes no representation as to its relevance, accuracy or
completeness and it should not be relied upon as such. As a result, Bionest Partners accepts no liability whatsoever
for any direct or consequential loss arising from any use of this report or its contents.
This report shall not be reproduced, distributed or published by any recipient for any purpose without the prior
consent of Bionest Partners.
All opinions and estimates herein reflect the judgment of Bionest Partners on the date of this report and are subject
to modifications without notice. Any investments referred to herein may involve significant risks and are not
necessarily available in all jurisdictions, may be illiquid and may not be suitable for all investors. The value of, or
income from, any securities referred to herein may fluctuate and/or be affected by changes in exchange rates. Past
performance is not indicative of future results. Investors are expected to make their own investment decisions
without relying on this publication. Only investors with sufficient knowledge and experience in financial and business
matters to evaluate the relevant merits and risks should consider an investment in any issuer or market discussed
herein.
The information contained in this publication is not available to a person who would be categorized as a private
customer under the rules of the FSA. To the extent that any securities, or any broker-dealer, investment adviser or
other services, are deemed to be offered herein for purposes of U.S. law, such securities or services are not being
offered in the United States or to U.S. persons absent from an exemption under applicable U.S. law. This report is not
intended for distribution to, or use by, U.S. persons without such an exemption.
1st Semester 2008
Page 11 of 12