About the company
Medifox is a leading provider of software solutions to over 16,000 outpatient care services, elderly care homes, therapist practices, youth care institutions and non-professional caregivers in Germany. The business supports care providers with key challenges including resource and route planning, care documentation, regulatory compliance and quality assurance of services provided, as well as invoicing systems. Medifox is characterised by a leading position in a fragmented sector, a robust financial profile, a highly competent management team and a “mission-critical” product. The company is headquartered in Hildesheim, Germany and employs over 500 people across six locations.
Investment rationale
- Medifox is a highly attractive business with a fragmented small and medium-sized business (“SMB”) customer base, a high retention and mission-critical, regulatory-driven product that is used daily.
- Medifox is benefiting from fundamental trends of integrated care, an ageing population and digitialisation driving underlying growth for the coming decades.
- Further growth is expected in the core outpatient segment, with tangible mergers and acquisition opportunities to further gain sector share in newer therapy and in-patient segments.
- Opportunities to make operational improvements led by a strong management team and operators.
Our relationship
Pantheon has been a longstanding investor with the manager having backed several mid-cap Hg Capital (“Hg”) funds since 2006. In addition, Pantheon holds advisory board seats for all of the Hg funds that it is invested in.
Active management and value creation
Medifox has grown substantially as a result of several of Hg’s initiatives since 2018, including:
- Achieving annualised organic revenue growth of over 10% via new customer wins and delivering adjacent functionality. This resulted in annualised revenue growth which was over 30% better than the peer average.
- Driving product and service innovation for the customers via the largest dedicated elderly care software research and development team in Germany (e.g. the new next-generation cloud-ready elderly care product).
- Driving digitalisation of sales and investing in systems landscape to deliver strong incremental margins, expanding EBITDA margins over time.
- Building a repeatable mergers and acquisition platform, with the execution and integration of nine acquisitions, including DAN Produkte.
Exit
Medifox was acquired by the US-listed strategic buyer, ResMed, a global leader in cloud-connected medical devices and out-of-hospital software-as-a-service (SaaS) business solutions, in a transaction valuing the business at an estimated US$1bn. PIP made a return of 4.1x on the original cost and a 40% IRR.
About the manager
Ambienta is a European private equity manager focused on investing in sustainability-driven businesses. The manager was founded in 2007 and has offices in Milan, London, Paris and Munich. Pantheon has a long-standing relationship with Ambienta and holds three advisory board seats with the manager. PIP has previously co-invested alongside Ambienta in SF Filter, a distributor of mobile and industrial filters for after-market applications.
ESG credentials
In 2020, Ambienta obtained Carbon Neutral certification for its commitment to Net Zero.
Ambienta IV is classified as Article 9 under SFDR1, meaning the fund has sustainable investment as its objective.
The United Nations Principles for Responsible Investment has awarded Ambienta their top rating every year since 2017.
Ambienta is committed to diversity and inclusion with 52% of hires in 2021 being female.
Ambienta’s “ESG in Action” programme monitors portfolio company progress against a range of ESG key performance indicators.
The manager is an active member of Institutional Investors Group on Climate Change, a global investor body which focuses on climate change.
Ambienta is a member of the Invest Europe Responsible Investment Roundtable.
Investment approach
Ambienta believes that sustainability is a mega-trend affecting all sectors in their own different ways. Ambienta IV will continue its investment strategy of targeting small- and medium-sized businesses in Europe whose products aid pollution control and resource efficiency in their respective sectors. The businesses will have scalable and profitable business models, growing international end-markets and differentiated market positions.
The manager typically looks for fast-growing businesses that lack the necessary capital, infrastructure or expertise, to sustain the next phase of growth. Ambienta aims to create value at the portfolio company level by focusing on:
- Strengthening the organisation through the implementation of stronger internal structures and processes;
- Identifying strategic and operational levers to enhance margins and long-term growth;
- Using buy & build strategies to consolidate a fragmented market;
- Growing the company’s geographical footprint; and
- Using ESG as a value creation tool.
The development of a dedicated Sustainability & Strategy function, whose role is to understand the ways in which resource efficiency and pollution control shape industries, enables the manager to screen and select the very best investment opportunities. The function, which comprises eight full-time employees, has provided Ambienta with a large bank of knowledge and expertise, and is an integral part of their investment process.
Ambienta’s unique approach to investing in businesses driven by sustainability has demonstrated that top decile financial returns can be combined with a measurable and favourable environmental impact.
Maiden investment from Ambienta IV
Ambienta recently completed its first investment from Ambienta IV into Previero, a designer and manufacturer of plastic recycling solutions. The business is set to play a key role in the transition towards the recycling of plastic; currently just 15% of plastic waste generated worldwide is recycled, due to a lack of infrastructure, while this is expected to need to double to meet corporate commitments and regulations.
Ambienta will support value creation opportunities in Previero through the provision of financial and managerial resources, as well as increased investment in both fixed and human capital.
About the company
OptConnect is a provider of wireless internet connectivity solutions for unattended equipment such as kiosks, smart vending, digital signage and ATMs. It enables a reliable Internet of Things (“IoT”) connection to provide a cost-effective and dependable platform for customers.
Investment rationale
- OptConnect has a resilient business model with predictable recurring revenues, healthy margins and a strong market position.
- The company’s total addressable market is projected to grow at an annual rate of 15% to 2025.
- The growth of the IoT market is likely to result in an increasing number of devices requiring wireless connections to the internet.
- Graham Partners originally invested in the company in 2017 and has focused on growing the business through new product innovation, expansion into new markets as well as the completion of an add-on acquisition.
- The manager has grown the number of installed products from 80,000 in 2017 to over 480,000, representing an annual growth rate of 43%.
Active management and value creation
Graham Partners is a specialist in the technology sector, with a particular focus on industrial technology. The manager sees a number of routes to further value creation including accretive M&A, increased operating leverage and earnings growth.
About the company
valantic is a consultancy and provider of software solutions for digital transformations. The company has over 800 consultants and developers and is represented in Germany, Austria, Switzerland, Belgium, the Netherlands, Portugal and many other international locations.
Eraneos is an international management and technology consulting group providing digitalisation and transformation services, from strategy development through to implementation. The company has 1,000 consultants in four core markets (Switzerland, Germany, the Netherlands and Spain).
Investment rationale
- Deutsche Private Equity (“DPE”) is a top-tier manager operating in Germany, Austria and Switzerland that has a strong track record of supporting and delivering organic growth for its portfolio companies and specialises in executing buy-and-build growth strategies. The manager has consistently generated strong returns over several funds.
- DPE wanted to move the two businesses to a continuation fund so that additional capital could be provided for further accretive add-on acquisitions.
- The growth of the digital transformation services market is expected to provide a strong tailwind for both companies, with an expected compounded annual growth rate of 9% until 2026 taking the total market size to more than €80bn.
- The business benefits from their sticky customer relationships, substantial scale combined with a customer-centric approach and a full end-to-end consulting service that is able to respond to customers’ needs.
- Eraneos has delivered robust performance with consistent above-market organic growth, maintained strong margins and cash conversion over the recent years. In combination with a well-executed growth strategy and successful buy-and-build strategy Eraneos was able to strengthen its positioning with a footprint in four European markets.
Active management and value creation
- Both businesses have grown substantially under the ownership of DPE, with revenues increasing by over 270% for Eraneos since it was acquired in 2017, and more than 240% for valantic since it was acquired in 2019.
- valantic has a track record of completing and integrating add-on acquisitions, with 15 completed under the ownership of DPE, who originally invested in the business in 2019.
- valantic sees routes to further value creation through the launch of new technologies and service offerings. These will enable customers to benefit from a more comprehensive portfolio of products and services, while the business will also focus on developing new customer markets in Scandinavia and Benelux. The company has continued to deliver strong organic growth and has already completed five add-on acquisitions over the past six months.
- Eraneos has also continued to expand through M&A with two recent acquisitions in Germany. In addition, the group is pursuing organic growth opportunities and recently opened a new office in Austria, while enhanced client support and expanding joint consultancy businesses are also expected to drive growth. Eraneos is targeting double-digit growth for 2023 and beyond.
About the company
Waystone is a provider of outsourced governance, risk and compliance services to the asset management industry. The company services a number of blue-chip asset managers with combined assets under management of US$2tn. Waystone has grown to now employ c.350 individuals in globally recognised epicentres for fund management including London, Hong Kong, Singapore, Ireland and Luxembourg.
Investment rationale
- Founded in 2000, the company has grown organically and through a mergers and acquisition strategy, with nine add-on acquisitions completed between 2019 and 2021.
- The company provides services that are mission-critical to a fund’s set-up and ongoing operation. This results in a sticky business model evidenced by historically low customer churn rates and limited customer switching.
- Regulatory scrutiny and increasing complexity are providing a strong tailwind for the industry, in which Waystone is a leading player.
- Montagu Private Equity (“Montagu”) has extensive experience in fund services, including a successful investment in peer company, Universal Investment.
- Since Montagu’s investment in 2021, the company has grown organically and through targeted add-on acquisitions which have expanded Waystone’s service offering and geographical footprint.
Our relationship
Pantheon has a long-standing relationship with Montagu. PIP is a primary investor and has also co-invested alongside the manager, while Pantheon holds an advisory board seat with Montagu. Early engagement with Montagu allowed Pantheon to secure a sizeable allocation in this opportunity.
Active management and value creation
As a joint owner of Waystone, Montagu will have the opportunity to implement organisational best practices and further support Waystone’s buy-and-build strategy.
In April 2023, shortly following PIP’s co-investment in the company, Waystone signed agreements to acquire Link Fund Solutions, a European fund services provider with £160bn of assets under oversight and administration, closing subject to regulatory approval and other conditions. Combined with the acquisitions of KB Associates, Centaur Fund Administration and T. Bailey Fund Services in the past year, a comprehensive product offering and exposure to structurally growing markets, Waystone is well placed to continue its current growth trajectory.
About the company
Sentinel Capital Partners (“Sentinel”) is a US-based private equity manager focused on investing in mid-market businesses. The manager has raised US$11.2 billion of capital since inception and has a track record of growing businesses and creating value for investors. In November 2022, Sentinel Capital Partners VII raised $4.35 billion from new and existing investors, with strong demand resulting in a larger than targeted fund.
Pantheon has a long-standing relationship with Sentinel with PIP investing in one of Sentinel’s previous funds. Pantheon also holds four advisory board seats with the manager.
Sentinel’s investment rationale
Sentinel targets mid-market companies and the fund will consist of roughly 20–25 equity investments of $150 to $175 million each.
The manager has a strong focus on core industry sectors including: business services, consumer products/services, healthcare services, and industrials.
When assessing an investment opportunity, Sentinel is seeking:
- A strong management team with a long-term vision and alignment of interest;
- Market leadership in the product line, geography or technology;
- A diversified customer base or product line; and
- The opportunity to grow via M&A or organically.
Investment rationale
Sentinel aims to create value through operational improvements that lead to both revenue and profit growth, while accretive add-on acquisitions also drive growth.
Sentinel is a top-quartile performing manager with a proven and repeatable investment strategy.
The manager has a stable senior investment team, with a combined total average of over 20 years at Sentinel.
Maiden investment from Sentinel Capital Partners VII
In November 2022, Sentinel made its first investment from Sentinel Capital Partners VII into L2 Brands (“L2”). L2 is a designer, manufacturer and marketer of custom-decorated apparel and headwear for the collegiate, destination and leisure, and corporate markets. Since its founding in 1991, L2 has become a diversified business with a history of long-term profitable growth.
Sentinel’s experience and track record in this sector will enable L2 to accelerate its growth, both organically and through add-on acquisitions.
About the company
The Access Group (‘Access’) employs approximately 5,000 people and is a leading provider of fully integrated mission-critical business management software solutions to medium-sized organisations in the UK. The company has approximately 60,000 customers and its products are used across a variety of functions such as finance, HR, payroll, hospitality, recruitment, health & social care, manufacturing & distribution, education and the not-for-profit sectors.
Investment rationale
- Hg Capital has owned Access since 2018 and this additional investment will enable the continued expansion of the business.
- Access has delivered uninterrupted profitable growth in the last 15 years and since 2020, the business has doubled in size. This has been driven by double-digit organic growth, as well as acquisitions in the UK, Ireland and Asia Pacific.
Our relationship
Pantheon has a long-standing relationship with Hg, having first invested in one of their funds in 2005, and it currently holds 10 advisory board seats with the manager. Furthermore, PIP currently has six co-investments alongside Hg.
Active management and value creation
Hg Capital has significant specialised expertise having led over 170 investments in the software and services sector during the last 25 years.
The new investment will enable Access to continue to focus on its growth strategy and enhancing its products and solutions, specifically its SaaS platform. In addition, its comprehensive product range offers significant cross-selling opportunities. Finally, the company has an experienced in-house M&A team with a strong deal pipeline.
About the company
Headquartered in Paris, GEDH is a leading player in the private higher education sector in France. With close to 300 employees, serving approximately 12,000 students, it delivers certified graduate programmes and specialised masters and post graduate degrees in subjects such as communication, artistic and cultural management, journalism, design, cinema, animation and software coding. The company owns nine schools that are spread across 25 campuses in France and beyond.
Investment rationale
- GEDH operates in a market that is experiencing sustainable, long-term double-digit growth. The company has a healthy financial profile with recurring and visible revenues, strong profit margins and an asset-light business model.
- There are significant barriers to entry due to regulatory constraints and the expertise, track record and reputation which are required to attract students.
- Recently, the business has been executing a buy-and-build strategy through the acquisition of schools with similar academic offerings. It has deployed its brands across 11 further campuses in France, accelerated the roll-out of new education programmes and strengthened its organisational structure.
Our relationship
Pantheon invested in Five Arrows’ latest fund and holds an advisory board seat. Furthermore, PIP has also invested alongside Five Arrows in a manager-led secondary.
Active management and value creation
Five Arrows has been tracking education and training businesses in this space as part of its thematic sector coverage and has already completed two deals in this area. The private equity manager has significant internationalisation and M&A experience that can help unlock the next phase of growth for GEDH. The company has already identified a number of bolt-on acquisition opportunities.
About the company
Smile Doctors is a provider of orthodontic treatments and services which include bracket and wire braces, clear aligners and retainer insurance. As of December 2022, the company had over 350 clinics in 27 states in the USA.
Investment rationale
- Smile Doctors is more than four times larger than its closest peer and is a leader in the large and growing orthodontics industry in the USA.
- The company’s scale positions it well and gives it first mover advantage to execute on the consolidation opportunities in this fragmented market, where approximately 95% of US orthodontic practices are independent.
- Smile Doctors has an attractive financial profile given its high recurring revenues and strong profit margins.
Active management and value creation
Linden Capital Partners is a dedicated healthcare specialist firm and has an 18-year track record of healthcare investing. It partners actively with management teams to create value during its ownership period. Linden has been an investor in Smile Doctors since 2017, growing the business significantly through M&A with the completion of over 100 add-on acquisitions.
There are significant benefits to an independent orthodontic practice joining Smile Doctors including access to the latest orthodontic technology, marketing support and access to operational and financial resources to improve the business. The management team at Smile Doctors has developed an M&A playbook to target acquisitions that offer the potential for near-term cost synergies and revenue uplifts. The business has also formed a dedicated team focused on acquiring and integrating businesses to capitalise on these opportunities.
About the company
ShiftKey operates a leading marketplace platform that connects available nurses with healthcare facilities across the United States. The platform allows nurses to share their credentials and then apply to work daily shifts that match their requirements.
ShiftKey provides staffing solutions to over 10,000 facilities in over 30 states and boasts a network of hundreds of thousands of nurses.
Investment rationale
- The company has benefitted from the fundamental supply/demand imbalance caused by an ageing population and a severe, ongoing nursing shortage in the USA where 94% of skilled nursing and assisted living facilities in the USA are understaffed. Both of these situations were exacerbated by the COVID-19 pandemic. This resulted in an increasing requirement for per-diem nurses to cover shifts.
- Growing numbers of nurses are using the platform given the higher pay and flexibility offered by per-diem shifts.
- The company has demonstrated rapid organic growth since its founding in 2016, and has an impressive financial profile with strong margins and customer retention.
Active management and value creation
Lorient Capital is a middle market, healthcare-specialist manager focused specifically on healthcare services and technology. They have owned the business since March 2021.
ShiftKey recently completed a strategic investment in OnShift, a provider of workforce management technology for post-acute and long-term care facilities, creating the first complete solution to effectively manage nursing schedules. The investment will significantly increase the stickiness of ShiftKey’s customer relationships, enable cross-selling opportunities and provide customers with new and innovative products that will help benefit their organisations.
The company’s core market is in post-acute care, but the private equity manager sees growth opportunities in other healthcare end markets such as pharmacy, physical therapy and dentistry.