Good morning, Nina Lindholm here – I’ll be taking over the US Wire on Thursdays.
We start with a familiar Thursday topic: upcoming companies-for-sale activity. We delve into the sectors showing most promise, as well as hear insights from Justin Abelow, a managing director in Houlihan Lokey’s financial sponsors group, and Effram Kaplan, co-CEO of investment bank Brown Gibbons Lang.
Next, we have an exclusive by my colleague Iris Dorbian. Vector Capital Management has tapped Kiran Rao as managing director and head of value creation, PE Hub was first to reveal. In the story, Iris discusses Rao’s motivation to move from Vista Equity Partners to Vector.
We finish with a fresh deal. Sheridan Capital Partners has completed an investment in PtEverywhere, a practice management and integrated payments software platform based in Raleigh, North Carolina.
‘Massive interest’
As Q4 approaches, the pipeline of companies being readied for sale appears robust. Year to date, PE Hub has been briefed by confidential sources on 205 companies coming to market, compared with 94 at the same time a year ago.
The sectors that promise the most activity include business services, healthcare, fintech, industrials, aerospace and defense and anything that benefits from the AI buildout.
To find out more about what we can expect from companies coming to market, PE Hub connected with Justin Abelow, a managing director in Houlihan Lokey’s financial sponsors group, and Effram Kaplan, co-CEO of investment bank Brown Gibbons Lang.
“We are seeing a broad-based increase of deals launching into this market, and it is hard to find a down sector,” Abelow told PE Hub. “Some areas even stronger than others include business services, healthcare, fintech and industrials.
“In general, many tech-enabled services businesses that are adjacent to but discrete from traditional software sectors are seeing enhanced demand from both strategic and financial buyers.”
“When it comes to sectors, aerospace and defense remains an attractive sector with continued movement, as do both infrastructure and essential services,” said Kaplan. “Sectors that are derivatives of the AI buildout are generating massive interest.”
Exits from the business services and healthcare segments are evidenced by four recent deals over the last few weeks:
- PE Hub has followed or actively covered the sale process for clinical research and biopharma services firm Precision Medicine Group, sold by Blackstone to McKesson for a reported $2.25 billion in a deal announced in late August.
- In the second deal, on September 2 health-tech firm Outcomes One was sold by GTCR and BlackRock to HIG Capital.
- In the third deal, family-owned healthcare laundry services firm Unitex was sold to CVC Capital. PE Hub tracked the company in the market recently at a $70 million EBITDA valuation.
- Reportedly, a fourth company, A1 Garage Door – which we noted was for sale earlier this summer – is in late-stage discussions to be acquired by KKR at a $2 billion valuation.
PE Hub’s active companies-for-sale coverage shows the most activity on processes being launched coming from industrials (15 companies in the market), healthcare services (13 companies), HVAC and commercial business services (11 companies).
Read the full piece for an analysis of mid-market valuations across the sectors of manufacturing, professional services and healthcare providers.
I’d love to keep the conversation going regarding companies coming to market. For any tips, you can email me at nina.l@pei.group.
Competitive advantage
On the topic of valuations, let’s move over to people news in the world of value creation. Vector Capital Management has tapped Kiran Rao as managing director and head of value creation, PE Hub was first to reveal.
Rao is joining Vector from Vista Equity Partners, where he served for five years as chief operating officer of its operations team and led its AI taskforce across more than 50 enterprise software companies. Previously, he was an operating partner at TPG and a senior engagement manager at McKinsey & Company.
In addition to his new roles at Vector, Rao will also serve on the firm’s management committee.
When asked what prompted him to join Vector, Rao told PE Hub it was an opportunity he couldn’t pass up.
“In contrast to many investment firms that chase prized assets at premium valuations and bet on growth at any price, Vector has remained steadfast in the parts of the market most firms walk away from: lender-distress situations, complex carve-outs, deep-value take-privates in established software and venture buyouts, an area where the firm is especially active today,” he said.
“In those situations, Vector’s edge is in its operational skill, honed and applied over years, in this case nearly three decades, rather than a multiple someone else was willing to pay. What excites me most is Vector’s commitment to doubling down in this area by putting value creation at the center of its approach in the AI era.”
Another enticement was the way Vector works.
“At Vector, the investment team and the value creation team are one: we diligence a company together, we go to the investment committee together, and the deal and the value creation plan are approved as a single decision,” said Rao. “Vector’s integration is a genuine competitive advantage, in how we underwrite, in how fast we move in the first hundred days, and in how management teams experience us as a partner.”
Headquartered in San Francisco, Vector was founded in 1997. The tech-focused PE firm has completed more than 60 platform investments since its inception.
Check out the full interview to find out how the opportunity to work at Vector came about.
Simpler workflow
Before I sign off, let’s finish with a freshly closed deal. Sheridan Capital Partners has completed an investment in PtEverywhere, a practice management and integrated payments software platform serving outpatient physical therapy and related rehabilitation providers.
Based in Raleigh, North Carolina, PtEverywhere’s platform enables clinics to manage scheduling, clinical documentation, billing and collections through a single workflow. The platform primarily serves small and mid-sized physical therapy practices, including those operating on cash-pay and hybrid reimbursement models.
Current CEO Andrew Shofner will continue to lead the business under Sheridan’s ownership.
“Andrew and the PtE team have driven an impressive operational and technological transformation of the company,” said Jacob Greenberg, partner at Sheridan Capital Partners, in a statement. Greenberg added that the firm is confident PtE’s scalable infrastructure, differentiated technology and disciplined operating model will support both organic growth and strategic add-on acquisitions.
That’s all from me. I’ll be back tomorrow for the Europe Wire, while John R Fischer closes the week with the Friday US Wire.
Cheers,
Nina