New York- and San Francisco-based Behrman Capital has acquired 35 post-acute care facilities from a group of private investors for a total of $250 million (€183 million). From these facilities the firm has created a new entity, Ark Holdings, which it intends to use as a platform for acquisitions.
The post-acute healthcare space includes rehabilitation and post-surgical services. Behrman Capital has invested in this area before. With Ark, Behrman will seek to replicate the success of its investment in post-acute healthcare provider Tandem Health Care. Behrman acquired Tandem in 1998, at a time when the company’s revenues were $25 million. In 2006, Behrman sold Tandem to Virginia private equity real estate firm JER Partners and senior housing operator Formation Capital for $620 million.
“Tandem’s success was driven by a focused operational and clinical model,” said Behrman managing partner Grant Behrman.
Behrman cited the installation of an information technology infrastructure and an ancillary services platform as a contributing factor to Tandem’s successful growth. He also said his firm made acquisitions in order to strengthen Tandem’s capabilities in diagnostic imaging, institutional pharmacy, therapy and hospice services. Finally, the firm built up Tandem’s management team, both in breadth and depth, he said.
The firm will use a very similar approach with Ark, Behrman said.
“We intend to improve the operational clinical model by increasing the quality of care and treating higher acuity patients,” he said. “We’re also going to be building up the infrastructure in much the same way and pursuing the same ancillary services add-ons.”
Larry Deering, an operating partner of Behrman who was previously chairman and chief executive officer of Tandem, led the deal on Behrman’s side. Deering will assume the role of chairman at Ark.
Merrill Lynch will finance a senior term loan for the deal. Goodwin Procter was legal advisor to Behrman.
Behrman’s most recent fund closed in August 2001 on $1.2 billion. The firm primarily invests in the healthcare, defence, specialty manufacturing, outsourcing and information technology sectors.
Last month, the firm exited another portfolio company in the healthcare industry, WIL Research Laboratories, a lab that provides product safety and toxicological assessment research and services. Behrman sold the company to an undisclosed buyer for $500 million, earning a 3.6x return on its initial investment.