Private equity investors have been active in the dialysis sector for decades. In Part I of this series on dialysis investments, we describe the recent emergence of three companies with private equity backing.
First, in 2010 Bain Capital Ventures and KRG Capital invested in Liberty Dialysis, which in 2011 then acquired Welsh Carson–backed Renal Advantage and sold the entire combined company to Fresenius. As with other consolidations, that three-party merger will also result in the divestiture of approximately 50 dialysis clinics nationwide due to FTC demands. The resulting buyer could be one of a variety of players in the market.
Bain Capital Ventures was formed as a separate arm of Bain Capital to focus exclusively on growth investments. Their investments range from several hundred thousand dollars up to $100 million and focus on companies in the business services, consumer, healthcare, internet & mobile, and software sectors.
KRG Capital is a private equity investment firm specializing in acquiring controlling interests in middle-market companies and growing them into significantly larger enterprises through the combination of internal growth and selective strategic add-on acquisitions. They invest in companies with a history of operating profitability and strong growth prospects in specialty or "niche" manufacturing, distribution or service industries.
Getting confused yet? Don’t be. Consolidation in the dialysis industry has been common for many years, with multiple waves of consolidation of some of the largest companies into “supercompanies” (and, in some cases, resulting in forced divestiture of clinics following a FTC antitrust analysis).
Second, in 2011, Frazier Healthcare Ventures and NEA invested in DSI to purchase 30 dialysis clinics divested following the 2011 DaVita-DSI Renal merger.
Frazier Healthcare Ventures, founded in 1991, provides venture and growth equity capital to emerging healthcare companies. Since its founding 30 years ago, NEA has backed over 165 companies that have gone public and invested in more than 255 companies that have been successfully merged or acquired more liquidity events than any other venture capital firm. With offices in the U.S., India and China, NEA specializes in the information, technology, energy technology and healthcare sectors, with $11 billion in committed capital.
DSI Renal (a separate company from DSI but involving much of the same management team) was formed in 2006 with backing by private equity fund Centre Partners to purchase clinics at that time divested pursuant to the Fresenius-Renal Care Group merger.
Third, 2011 also saw American Dialysis Corporation partnering with Jefferies Capital Partners to acquire and build dialysis centers across the United States. American Dialysis Corporation, headed by Thomas K. Langbein, who had served as Chairman of Dialysis Corporation of America (DCAI) until selling the company to US Renal in 2010. Jefferies Capital Partners, a private equity firm that manages more than $1.6 billion in equity funds, centers its investment activities in later-stage growth companies and management buyouts in support of corporate expansion and industry consolidation. Their areas of focus include consumer, energy, financial services, healthcare, manufacturing and distribution, media, telecommunications and transportation.
U.S. Renal Care (USRC) itself and other small-to-mid-sized dialysis organizations (SDOs and MDOs, respectively) are also backed by private equity. In Part II of this series on private equity investment in dialysis, we will describe additional companies and their investors.