Mid Europa starts Polish healthcare buy-and-build

Mid Europa Partners has made its first bolt-on deal for LUX-MED, the Polish premium private healthcare business it acquired this month, after agreeing a secondary buyout of rival provider Medycyna Rodzinna.

The deal is the buyout firm’s first step in consolidating the Polish private healthcare market. It plans to use LUX-MED, the business it bought for around €50 million earlier this month, as a platform, and expects to make several more acquisitions during the next two years.

Terms were not disclosed, but a source close to the deal said MR was about 40 percent of the size of LUX-MED by revenues, suggesting a purchase price in the region of €20 million. The business was previously owned by Polish buyout firm Enterprise Investors through its Polish Enterprise Fund, which counts the European Bank for Reconstruction and Development among its investors.

The combined entity will become the largest single player in Poland’s fragmented private healthcare market, with more than 30 clinics nationwide. Mid Europa director Matthew Strassberg said this would offer some opportunities for cost synergies – such as a combined headquarters – while also increasing purchasing power.

However, the two businesses will largely be run separately, with the respective management teams remaining in place. LUX-MED is a premium offering, serving a mainly urban corporate client base, while Medycyna Rodzinna – which means “family medicine” in Polish – is targeted at a less high-end part of the market. It began life as a contract primary care provider for Poland’s state-sponsored National Health Fund, which still accounts for about two-thirds of its revenues, and operates largely in residential areas.

This makes the two businesses “completely complementary”, according to Strassberg. It would also mean the firm can offer big corporate clients “a more stratified” private healthcare offering, across all areas of its workforce.

One other possible area of cost saving is AVI, a diagnostics business that MR bought last year. Currently AVI has more capacity than MR needs, so it also provides services to third party providers, but Strassberg hopes it will eventually become a proprietary service for the LUX-MED group.

Further bolt-ons for LUX-MED are likely. Strassberg stressed that Mid Europa was not currently in discussions about any other deals, but said it would like to do more over the coming two years. However, he expects that once the MR integration is complete the local management will take much of the responsibility for further acquisitions – unless it is a large, transformational deal that requires more equity from Mid Europa’s fund.

The MR deal is likely to close in the second half of 2007.