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Bain Capital shares healthcare outlook; Golub reports on mid-market private company earnings in Q4

Happy Fri-yay, Hubsters!

Aaron here on this freaky Friday the 13th.

We’re doubling down on healthcare today. We’ll kick things off with a sector outlook from a top 10 firm on the Buyouts 100 list.

Next up, a report on M&A activity in healthcare, and then moving beyond the sector, we’ll dig into some Q4 2022 numbers about the growth of middle-market private companies.

We’ve also got an exclusive piece on Alpine’s latest investment, and then we’ll close with the most recent podcast episode from PEI Group, all about inclusion and diversity in private equity.

Healthcare heartbeat. As you may know, we have been doing a series of outlook Q&A pieces from various PE experts and dealmaker extraordinaries. Focusing on the healthcare sector, I got thoughts from Chris Gordon, a partner and the global head of healthcare at Bain Capital.

Here’s an excerpt:

What was the biggest challenge to completing deals in 2022? 

As in any period of value dislocation, it can be very challenging for buyers and sellers to find common ground. Sellers remember the still-recent past and buyers fear the future.

Completing investments in this type of environment requires a lot of conviction and creativity, the ability to invest across asset classes, and real, demonstrated value-creation capability. If you believe you can drive real operating value through valuation cycles, then the focus becomes long-term growth.

You can read the whole piece here.

Sub-sector success. Funds have been more selective, searching for pockets of activity in choice subsectors and even geographies, according to a report on healthcare investing from Bain and Company.

“Funds looked for businesses resilient to a potential inflation-driven downturn or ways to take advantage of falling public valuations,” said the report. “From a healthcare subsector perspective, life sciences continued to attract interest from buyout funds, and we have seen a shift in activity toward healthcare information technology (HCIT).

Revenue rise. Some surprisingly good news: Mid-market private companies in the Golub Capital Altman Index experienced year-over-year earnings growth of 9 percent and revenue growth of 11 percent during October and November.

Of the four key sectors tracked, technology grew 12.8 percent; industrials climbed 10.7 percent; healthcare jumped 10.3 percent, and consumer rose 9.4 percent.

“This quarter’s results are a positive surprise. Revenue and profit growth each exceeded inflation by significant margins,” said Lawrence Golub, CEO of Golub Capital. 

The data is based on real earnings and revenue of approximately 110-150 private US companies in Golub’s loan portfolio.

Inventory shrinkage. Retailers have been besieged by challenges over the last several years, as consumers shop increasingly online for several reasons, including fear of crime, wrote Obey Martin Manayiti.

Obey spoke with Alpine Investors’ co-founder partner Mark Strauch, who co-leads the software and tech-enabled services vertical at the San Francisco PE firm and serves as chairman of ASG, and Steve Reardon, the CEO of Alpine Software Group, about its recent milestone investment.

Obey wrote an exclusive story about how ASG has acquired ThinkLP, a Waterloo, Ontario-based provider of software designed to reduce inventory “shrinkage” ((an accounting term used to describe when a store has fewer items in stock than in its recorded book inventory due to theft and other factors).

The deal marks the 50th acquisition for ASG since 2016. Specializing in Software-as-a-Service, the Walnut Creek, California-based business has acquired companies across 10 verticals with 17 distinct companies, partnering with more than 70 founders.

You can read the whole story here.

LGBTQ+ support. In the second episode of Private Equity International’s On the Minds of Millennials miniseries, Advent International’s Christina Drakos and KKR’s Brandon Donnenfeld share experiences about coming out in the PE industry.

The LGBTQ+ community is still very much under-represented within private equity, so much so that there is hardly any data to contend with compared to other diversity measures such as ethnicity and gender. As a result, LGBTQ+ professionals may struggle with their identity within a work setting. So it is essential that firms prioritize wellbeing and create an environment where employees feel comfortable to be themselves, said Mina Tumay and Evie Rusman, who hosted the episode.

You can listen to the podcast here.

That is going to do it for today. I wish everyone a wonderful wildcard and long weekend.

PEI Group in the US will be closed on Monday, in honor of Dr. Martin Luther King Jr.

I’ll be back on the Wire on Tuesday.

Cheers,

Aaron

Read thefull wire commentaryon PE Hub …

Also of note (may require subscriptions)

General Atlantic-backed Forma Brands, a cosmetics platform that helped superstar Ariana Grande launch her REM Beauty brand, filed for Chapter 11 protection from creditors Thursday. (Buyouts)

CalPERS’ $1 billion bet shows it’s serious about revamping its PE program. (Private Equity International)

Female-led agribusinesses are less likely to experience significant revenue dips and more likely to find new sources of capital than traditional counterparts, according to research conducted by ag-focused debt provider Root Capital. (Agri Investor)

Hani Othman Baothman, chairman of Saudi Arabia’s Sidra Capital, explains how the firm’s partnership with BlackRock will provide sharia-compliant co-investment capital to GPs in the Arabian Gulf. (Private Equity International)

Summa Equity is preparing to launch a single-asset continuation vehicle to hold on to an asset from its debut fund. (New Private Markets)

One year after the acquisition of AMP Capital’s infrastructure debt business, Ares Management has closed the fifth fund in the series – and its first infrastructure debt fund on $5bn, hailing it as the largest-ever infrastructure debt fund. (Infrastructure Investor)

Investors are expecting impact funds and assets to become a larger slice of a growing secondaries pie this year. (New Private Markets)

"Carlyle Group has sounded out two senior Wall Street bankers about becoming its next chief executive as the private equity group tries to conclude a months-long process to find a new leader after the abrupt departure of Kewsong Lee last year." (Financial Times)

Private equity dealmakers are refilling deal pipelines, eyeing carveouts and pursuing add-ons like gangbusters despite market uncertainty, panelists said at a JPM session this week. (Axios)

"A proposed federal ban on worker noncompete agreements could inflate already high private-equity salaries, while posing challenges to firms to keep top talent." (WSJ Pro)

"Goldman Sachs Group Inc.’s asset-management arm said it has rounded up $15.2 billion to make junior debt investments in companies backed by private-equity firms, the latest pool targeting mezzanine financing." (WSJ Pro)