A private equity group with roots in Germany but now in the Middle East and Asia, known as TVM Capital Healthcare, now raises its second growth capital fund centering its attention on healthcare and life science-related investments in the Gulf region as well as a first fund in the Asia-Pacific region as the investor expands its global footprint. With a keen eye on healthcare and life science firms in emerging markets, TVM Capital Healthcare must take a strategic, longer view.
Who is TVM Capital Healthcare?
TVM Capital Healthcare grew from the Munich-based TVM Capital, was founded as a corporate venture arm by industrial company Siemens. Originally set up to invest in tech companies, the fund pivoted to life sciences investments later on, reports UAE’s The National.
How long has the company been investing in the Gulf/Middle East region?
A decade. The company first closed its Dubai fund 10 years ago.
Is the new Gulf region-focused fund mainly so-called Gulf nations?
Yes, in addition to Saudi Arabia.
How many deals will TVM Capital Healthcare seek to do in the Gulf region with the new fund?
Chairman and chief executive Helmut Schuehsler reports they will seek to do 8 deals with per average investment between $20 million to $40 million.
They typically don’t invest alone reports Schuehsler. They can start small say $5 million and grow with the company into a $20 to $40 million. They look for collaborations with other investors.
What is the focus of the healthcare investment group?
This fund was set up to make investments in the health sector in emerging markets such as Dubai. That first fund made five investments including four in the Gulf and one in Egypt. Investment examples include a provider of rehabilitation centers called Provita, which was sold along with co-investors Olayan Group and Al Zaroni Emirates to NMC Health in 2016 for $160.6 million.
Note NMC Health, not part of the portfolio, operating over 200 facilities, has encountered problems. It was accused in 2019 of understating debt on its balance sheet and later disclosed far greater debt load. By April 2020, the company was placed in insolvency.
The other four target investments included Amecath, Bourn Hall Fertility Center, Cambridge Medical and Rehabilitation Centre, and Manzil Healthcare Services. The fund still holds these assets as the building out of these companies has taken time.
When the fund started was healthcare and life sciences’ M&A developed?
No. There was not a lot of M&A—it was not developed.
Is the Gulf & Middle East region’s finance capital sector for health sector M&A developing now?
This depends on perspective. Mr. Schuehsler report that on the one hand there are few professional M&A firms buying up companies consistently but on the other hand a number of regional healthcare firms have “grown organically” over the last couple decades and he anticipates they will be active acquirers hence leading to liquidity events. Examples include Dallah Healthcare, Sulaiman al Habib and many hospital groups. The German investor suspects “trade sales to regional healthcare companies as the most likely exit route for the first fund’s assets or secondary sales to other private equity funds or syndicates, which could include family offices.”
What is the strategy for these German healthcare investors moving forward?
They seek a two-pronged strategy based on investments in emerging healthcare markets in the Middle East as well as another in South-East Asia. Their main focus in the Gulf region will be all areas of health care except for general hospitals because the latter is saturated. But the investors are interested in pharmaceuticals manufacturing, medical devices or specialized health delivery models.
The investors will take on strategic role to help get these firms to what he calls “critical mass” which is anywhere from $30 million to $80 million in revenues, profitable and achieving 10% to 20% growth annually—if not 25%.
Impact of COVID?
The investor thus far has only made two private equity-backed buyout deals in the first half of 2020, compared to 12 for last year.
What’s their biggest deal?
Helmut Schuehsler is a former chairman of the European private equity and venture capital association, Invest Europe and a former member of the steering committee of the now-defunct Middle East Private Equity Association.