You’re reading Value Add’s weekly briefing, the leading newsletter for the operating side of private equity. Here’s what you need to know this week, from insights for PE-backed executives and portco news to recent buyouts and investment trends. 

Insights

Chart of the Week: Thirty-six percent of private equity operating partners have consulting experience, according to a recent analysis by Value Add, making it the most common path to such roles. However, PE firms are increasingly emphasizing functional specialties, such as finance and technology, which is broadening the range of industries and companies they recruit from to fill operations roles. (Read More)

More Insights

• US PE’s Outperformance of European PE is Structural, Not Operational (Read)
• These Are the Top Feeder Companies for PE Operating Partners (Read)
• Why Do Smaller Buyouts Outperform Large Caps? Operations. (Read)
• How the Unwinding of the Yen Carry Trade Affects Private Equity (Read)
• PE Ownership Bears Some Blame for the Healthcare Cyberattack Crisis (Read)

Spotlight

Back to Baxter. Baxter International first announced plans to spin off its kidney care unit in January 2023, the company's largest business unit. Given that, Baxter was keen to find the right price for the newly dubbed spinoff firm, Vantive.

The firm was prepared to take Vantive private. Then, the Carlyle Group came in.

The two entities struck a deal for Carlyle to acquire Vantive for $3.8 billion, $3.5 billion in cash. Vantive generates $4.5 billion of annual revenue, though Forbes estimates $4 billion as Vantive’s fair-market value or 10x EBITDA. Carlyle’s deal likely represents a 9.5x EBITDA, then – slightly higher than the industry average.

The deal is expected to close in late 2024 or early 2025.

Carlyle’s health kick. Carlyle currently has 37 healthcare-related assets in its portfolio, though this acquisition marks the firm’s first kidney care investment in decades. That’s despite Anthony Welters, former chairman of kidney care company Somatus, being on Carlyle’s board.

Healthcare has been an important vertical for Carlyle, with Steve Wise, former global head of healthcare, being promoted to co-head of private equity, Americas in June. 

Additionally, Carlyle created Atmas Health, an operational partnership funded by Carlyle, in 2022. The partnership is led by long-time industry executives Kieren Gallahue, Jim Hinrichs, and Jim Prutow, whose collective experience will be “leveraged to build real value” in Carlyle’s healthcare portfolio, according to Gallahue.

Both Gallahue and Hinrichs are ex-Care Fusion, a med tech company acquired by BD in 2015, while Prutow is a former partner at PwC specializing in healthcare M&A due diligence.

No time to flatline. This partnership with Atmas will be an important strategy for growth, as Gallahue will serve as Vantive’s chairman to oversee the asset along the way. 

“We look forward to working together to build upon Vantive’s track record of patient-focused innovation and create long-term value in this next phase of the company’s development,” Gallahue stated in a press release on the transaction. 

PE carve-outs typically prove to be difficult when it comes to replacing the business functions that were formally centralized. However, there is evidence that the strategy can succeed in the healthcare space – KKR, for example, sold Capsugel to Lonza for a whopping $5.5 billion in 2016, a firm which it carved out from Pfizer for $2.38 billion in 2011. 

There are also strong tailwinds in the kidney care space. Baxter claimed that Vantive will operate in markets totaling $15 billion and believes it can grow at a rate between 4% and 5%. This is something that is mirrored in Vantive’s competitors – DaVita, for instance, increased its 2024 profit forecast this month due to an uptick in dialysis demand.

Carlyle did not respond to request for comment.

Buyout News 

Thoma Bravo has exited Trader Corp, a Canadian online auto marketplace, to Hellman & Friedman-backed AutoScout24, a European peer company. Financial terms of the deal, to close in Q4 2024, were undisclosed, though Bloomberg reported the firm’s estimated value as C$4 billion ($2.9 billion) in June. Thoma Bravo acquired the asset from Apax Partners in 2016 for about C$1.57 billion. 

And that’s about it for large cap deals that closed last week… bankers need a vacation too, right? We are in the dog days of summer, after all. Despite that, many firms are launching sales processes that are sure to get going once everyone returns to the office (sunburns and all). 

For starters, Turn/River Capital is looking to sell Redwood Software, a task automation software platform. Partnering with Goldman Sachs for the sale process, the San Francisco-based software investment firm is looking for a deal that values the asset at $2.5 billion inclusive of debt, or 25x its $100 million EBITDA. 

Also, Carlyle, Blackstone, Permira, CVC, Cinven, New Mountain Capital, and Bridgepoint are amongst the potential buyers for Grant Thornton, a British mid-tier accountancy firm valued between £1 billion and £1.5 billion ($1.32 billion and $1.98 billion). New Mountain Capital is seeking the asset to merge its American, British, and Irish businesses, as it holds a majority stake in the firm’s US business. Deadlines for proposals are due in September. 

And finally, Evolent Health, a healthcare software provider, is considering a take-private. It has a current market valuation of $3.8 billion. TPG, KKR, and CD&R are amongst the bidders, with TPG being an early investor in Evolent. Elevance Health, an insurance provider, is reportedly seeking to partner with a PE firm to launch its own bid. A deal is expected to be announced in the coming weeks.