Global investment firm KKR’s acquisition of Clinisupplies accelerates the growth potential of the UK-based manufacturer and distributor of continence care products. It also supports the buildout of an international chronic care medical devices platform. The healthcare sector is likely to see similar distribution platforms established as Private Equity firms target long-term care trends. Nick Herbert reports.
In December 2022, KKR through its Health Care Strategic Growth Fund II ‒ a US$4bn fund focused on investing in high-growth healthcare companies ‒ acquired Clinisupplies from Healthium for an undisclosed amount.
Clinisupplies’ products, which include urinary collecting devices and catheters, are supplied to hospitals and pharmacies. They are also available through its home delivery services. It employs over 400 employees.
KKR has plans to enhance Clinisupplies’ leadership position in collecting devices, support organic and inorganic growth, and expand its broader chronic care portfolio.
‘With KKR’s global network and market knowledge, . . . we will be able to expand into new products and geographies, helping to support more and more people and bringing us one step closer to our goal of becoming an international leader in the chronic care market,’ said Paul Cook, CEO of Clinisupplies.
It also represents an example of a private equity (PE) firm following a platform strategy in the healthcare sector.
‘This investment is another example of our Health Care Strategic Growth platform strategy in collaboration with proven operators in a thematic area we have been following for some time,’ said Kugan Sathiyanandarajah, MD and head of Europe for KKR Health Care Strategic Growth.
There are likely to be more such deals as PE firms build healthcare platforms to capture the growing trend towards managing care outside of the hospital environment builds.
‘Building a healthcare platform is a subset of a larger trend about care delivery,’ said Paul Tomasic, head of European Healthcare, Houlihan Lokey.
‘We’re seeing more and more disease conditions become chronic in nature and people are living longer. Delivering care is increasingly becoming a question of managing patients outside of the hospital setting.’
Houlihan Lokey was financial advisor to KKR on the Clinisupplies transaction.
Patients also have a greater appetite in taking responsibility for care into their own hands, becoming less reliant on a doctor or hospital.
‘And that’s what this KKR deal with Clinisupplies taps into,’ said Tomasic.
Clinisupplies markets a full suite of continence care products for managing acute and chronic conditions. It includes collecting devices, and intermittent catheters as well as bandages, tapes and other accessories. It supplies its products through the NHS and delivers direct to patients’ homes through Clinidirect, its dispensing appliance contractor.
‘Having a distribution channel is important and once that is in place, you have the potential to deliver other devices,’ said Tomasic.
‘Private equity sees the distribution of medical products as a way to build an investment piece in healthcare.’
There is logic to the strategy. Private equity is searching for the next areas within healthcare in which to buy, build and consolidate.
‘I don’t want to say that certain sectors, such as dentistry for instance, have reached their end game because there’s still a lot more that can be done,’ said Tomasic.
‘But I think the question everybody asks themselves in private equity is, if I don’t already own a dental platform at this stage, am I the right next buyer?’
And distribution is no longer restricted to the view of boxes delivered by FedEx or UPS.
For private equity, having a distribution channel helps capture a long-term audience outside of the hospital setting to which they can deliver a range of healthcare products. A distribution channel helps capitalise on the trend towards managing chronic illness at home and people taking greater responsibility for healthcare.
Private equity sees the opportunities in healthcare distribution because they’ve seen it working in other parts of the economy.
‘Healthcare plays into the world of private equity because this industry is very fragmented,’ said Tomasic.
‘They are applying the same concept of “buy and build” in healthcare as employed in other sectors: buying more assets and expanding geographies through M&A to build platforms as well as improve operational efficiency.’
And the rise of digital health means that these platforms can connect directly with patients to support the management of chronic care.
There are other examples of healthcare delivery platforms. Healthcare 21, for instance, part of AddLife, is one of Europe’s fastest growing and rapidly expanding MedTech outsourced sales, marketing and distributions companies.
AddLife is a Swedish Medtech company that acquires companies in niche segments.
Another example is Vitruvian Partners, a European investor, which includes Sciensus (formerly Healthcare at Home), a European provider of clinical and pharmaceutical homecare solutions, as part of its portfolio.
As the healthcare industry shifts the treatment of many diseases into chronic care over long periods of time, businesses are attracted to addressing the need to treat illnesses outside of the hospital environment.
It also gives them an opportunity to expand the product range and deliver a wider array of services to patients.