Private Equity Investing in Health Care

So Jacob, to kick off the conversation, tell us a little about United Western Group.

Jacob Atkinson:
Yeah, so United Western Group is a private equity firm based in Washington, D.C. focused on leveraged buyouts in the lower and middle markets. So we look for companies that are usually founder led or second or third generation businesses that have a defensible market position, a strong management team, a strong track record, and a compelling value ad thesis to their customer base and their respective markets.

EMS:
Jacob, the recent transaction with Veridian Healthcare is quite exciting, and I'd love for you to walk us through the journey from start to finish on how you completed the deal.

JA:
Absolutely. So I'm not sure if I have time to go through the full journey today, but I can definitely give you some key insight on what allowed us to be successful in the deal and ultimately get it through the finish line. So every deal, of course, is always going to have its own unique characteristics and its own story, and that's certainly the case with Veridian. I would say the two individuals to give the most credit to are two operating partners, John Aldrich and Robert Friedberg. These are two individuals that have deep, deep experience in the healthcare sector. They were a really integral part of the transaction process from start to finish. So John added a ton of value really in the growth thesis, being involved in digital health the majority of his career, but also we had an advantage that he bought product from Veridian in his previous career.

So to understand how Veridian is positioned in the marketplace from a customer perspective was extremely valuable and John brought that to the table and really helped us understanding the business and underwriting the business from a market perspective. Rob, on the other hand, is an extremely sharp individual that has a lot of experience running hospitals and health systems at a high level. So he was a huge asset when we were underwriting the business, diligencing the company, understanding how we were going to move it into the digital health sector through RPM and kitting on what hospitals and the health systems really care about when it comes to that. So, with those two individuals, it really allowed us to be effective during our transaction process, and I honestly don't think the deal would've got done without them. And then, on the other hand, we were very, very focused on what the seller was looking for out of this transaction.

In every transaction, especially the ones we do, the seller desires and needs matters a lot. So we try to take a very focused approach on that and structure the transaction around that. And with Veridian specifically, this is a company that's built a very, very strong company culture, who've done very well over the years, and they have a management team and ownership that likes to win. So we took a lot of time to understand that company culture, make sure that that doesn't get disrupted post acquisition, and then also put a plan in front of the management team at Veridian that got them excited and allowed them to win. So we took a partnership approach, focused a lot on the sellers, but then put the right team around the table, including our capital providers, to put a win-win scenario in place.

EMS:
Very interesting journey, Jacob. And as a follow-up question, I'd love for you to elaborate more on the due diligence process during the transaction.

JA:
So the due diligence process in any deal is an extensive process, and that definitely was a case with Veridian. You really have to overturn every rock in a deal. You usually have about six months to learn everything there is to learn about a business that's been operating for 15, 20, 30 years. So, from cyber, accounting, tax, legal, environmental, IT, all of that is crucially important to have top tier advisors. And I probably would put accounting, tax and financial at the top of that list. And the Eisner team did a phenomenal job really helping us understand this business, understand what we were buying into, and allowed us to understand the story that the numbers painted from their 15-year track record and then in our QOE on the buy-side.

So that was absolutely critical. I think Bob, Phil, and Rich are extremely talented individuals that were really able to help us understand the company at a high level that we wouldn't be able to understand on our own in that six-month time period. And then, from the legal side, we partnered with Holland & Knight, who did a phenomenal job with legal diligence and, specifically, John Gilson, our attorney, helping us structure the deal and allowing us to ultimately be successful. So I think it's critical in any transaction, and it's definitely a testament with Veridian to have a great advisory team around you. And that's ultimately what I would say allowed us to be successful in this journey.

EMS:
Very interesting story, Jacob. Moving on, it's a high interest rate environment right now and would love for you to discuss, share, any challenges you faced raising both debt and equity to finance the transaction.

JA:
Yeah, so it is an interesting environment. I would say folks are definitely more conservative today than they probably were a few years ago. There's no massive rush to get capital out the door. I think folks are a lot more selective with the investment, so the best deals win. And I think that probably the most important aspect in fundraising in this environment is to find the right capital for the right deal. And the way we look at it when raising capital for any deal is really from a partnership approach. The capital providers that come into the deal, especially the larger groups, are groups that you're going to be partnering with moving forward in the business post acquisition.

So you mentioned HealthEdge and ACAP in the beginning of the podcast. There are two groups that have deep, deep experience in the healthcare sector. They understand the business, they understand our operating partners in our value added thesis, and they also add a ton of value from their previous experiencing, managing their assets and industry experience that they can add on the board post-acquisition to ultimately build a great team moving forward. So that was one of the key components, I think, and the Veridian deal, and I think in any deal is finding the right team and the right capital for the right deal.

EMS:
And Jacob, what about the buy-side process? Love for you to elaborate what you're looking for to ensure that it's a mutually beneficial transaction for today's market and transaction environment.

JA:
So, for the buy-side process, we look for transparency, I would say, clear communication and data to make data-driven decisions. So, one of the things that helps the most is when we have transparency both from the sell side, as mentioned, when you're doing diligence on a company, every rock is overturned. So, the more transparent the sell side can be with the buy side, the better because a group like Eisner is going to come in and find out everything there is to find out about the business. And when we have questions, being very upfront about the questions and clear about the questions and what has made the business work and the challenges with the business has helped a lot. And then, providing the data that allows us to really analyze a company and form our opinion and our thesis about the company, that's absolutely critical to be able to understand what's made them successful in the past and also what challenges they've had as well.

EMS:
Jacob, we've covered a lot of ground today and I wanted to see if you have any final thoughts or future plans about other transactions that you're contemplating.

JA:
Yeah, absolutely. We always look for good acquisitions in the lower middle markets, specifically founder-led businesses or second or third generation businesses that are looking to partner with folks that like to win and to take their business to the next level. But also, folks that want to make sure that the business is taken care of from the 20 plus years usually of hard work that they've built and that respects the quality asset that has taken a lot of time to build up. So, we're always looking for those companies. We're also looking for good capital partners to partner with on acquisitions and most of our acquisitions we always are bringing in co-investment and capital partners to build the right team around a deal. And then, we also love working with great advisors like Eisner to really provide the knowledge and insight from the years of experience they've had in QOE work and accounting and tax to help us validate our decision and help us really have a vision for the future with the companies we invest in.

EMS:
Well, Jacob, I want to thank you so much for sharing our perspective with our listeners.

JA:
Awesome. Thank you. It was great being here.

EMS:
And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business.

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