Welsh, Carson, Anderson & Stowe may be the biggest private equity firm that actively manages investments in healthcare services, but at least two others firms are active investors in providers.
Thoma Cressey Equity Partners, Chicago, manages about $1 billion for institutional investors, such as pension funds, foundations and universities. The firm was formed in 1998, after several partners split from Golder, Thoma, Cressey, Rauner.
David Mayer is a partner with Thoma Cressey who works on its healthcare accounts, which include hospital operator Essent Healthcare, Nashville, and Select Medical Corp., Mechanicsburg, Pa., a provider of long-term acute-care hospitals. Golder, Thoma also had invested in Rehab Hospital Services and Continental Medical Systems, which, like Select, were founded by Rocky Ortenzio, Select's chairman.
Thoma Cressey looks for established healthcare services niches that could benefit from consolidation. "Our goal when investing in healthcare services in particular is not to be the innovator," Mayer says.
MTS Health Partners is another private equity firm that is looking to invest in healthcare services, including acute-care hospitals, surgery centers, nurse staffing and specialty managed-care companies. The New York firm was founded in late 2000 and got a boost when Andrew Paul, a former partner with Welsh, Carson, came on board as part-time chairman in November 2001.
Paul says MTS is interested in making $10 million to $30 million investments in companies with $100 million in sales or lower. "We're going after the children. We'll get them big enough, and then they'll be candidates for Welsh, Carson," Paul says, adding that he maintains good relations with his former colleagues at the New York firm.
MTS has closed one deal, investing in National Mentor, Boston, which provides home- and community-based services for the developmentally disabled, and is considering 10 others, Paul says. The lead investor in National Mentor is Madison Dearborn Partners, Chicago, which provided early investments to Health Management Associates, Naples, Fla., and nursing home chain Genesis Health Ventures, Kennett Square, Pa. Madison Dearborn now focuses its healthcare investments in alternative services, such as dialysis centers, and physician staffing.