Leadership Newsletter

Healthcare

Winter 2015–2016

GTCR Firm Update

Since the firm’s inception in 1980, GTCR has partnered with management teams to build and transform growth businesses, investing over $12 billion in more than 200 companies. In January 2014, we closed GTCR Fund XI, the firm’s largest fund to date, with $3.85 billion of limited partner equity capital commitments. This follows GTCR Fund X, which we closed in 2011, with $3.25 billion of equity capital commitments. GTCR actively invested Fund X over the last four years, completing 17 platform acquisitions and 140 add-on acquisitions across our Healthcare, Financial Services & Technology, Technology, Media & Telecommunications and Growth Business Services sectors. To date, GTCR Fund XI has completed five investments, including four within the healthcare industry.

Healthcare Group Update

We believe GTCR’s nearly 35-year investment history in healthcare has made us one of the leading private equity investors in the sector. Since our founding, we have made more than 45 healthcare platform investments. The Healthcare team has been very active over the past 12 months. During that period, we have sold five portfolio companies for a combined enterprise value of $5.2 billion, made a new platform investment in Rx30 and completed seven add-on acquisitions across several of our eight portfolio companies.

We continue to identify attractive opportunities to invest capital in the healthcare industry. These opportunities are driven by attractive long-term healthcare utilization trends and an evolving industry landscape that increasingly includes new business models emphasizing both clinical outcomes and cost containment. An improving economy has helped the financial results at many healthcare companies, and low interest rates have reduced the cost of capital to finance acquisitions. These factors have contributed to relatively robust M&A activity in recent quarters. In this market environment, we believe GTCR’s domain expertise and unique strategy continue to provide us with competitive advantages as we source and evaluate healthcare investment opportunities. With our Leaders Strategy™, we seek to partner with exceptional management teams as the critical first step in identifying, acquiring and building market-leading companies through acquisitions and organic growth.

GTCR continues to seek investments across the healthcare and applied sciences industries, including medical devices, pharmaceuticals, life science tools and diagnostics, healthcare information technology, providers and payors. In this changing healthcare industry, we believe the GTCR Leaders Strategy™ will enable us to identify, acquire and build upon attractive platform opportunities.

GTCR’s portfolio companies have been highly acquisitive — approximately two-thirds of capital invested since 2000 has been in companies that completed at least one add-on acquisition. As this activity illustrates, we view inorganic growth as a critical element of value creation and therefore seek to develop robust and creative acquisition strategies. All of our active Healthcare businesses are looking for and evaluating add-on acquisitions in this market environment.

The Healthcare team, in particular, has been very active over the past few years. Below is a snapshot of our recent portfolio company activity:

Activity
Cedar Gate Technologies Healthcare data and analytics David Snow Management partnership
Cole-Parmer Instrument Co. Specialty lab equipment Bernd Brust Management partnership/platform acquisition and three add-on acquisitions
Correct Care Solutions Outsourced correctional healthcare services Executive
Chairman:

Jerry Boyle
CEO:
Jorge Dominicis
Merger of Correctional Healthcare Companies with Correct Care Solutions and one add-on acquisition
Crealta Pharmaceuticals Specialty pharmaceuticals Ed Fiorentino Management partnership/platform acquisition
Maravai LifeSciences Life sciences tools and diagnostics Carl Hull Management partnership
Rx30 Supplier of pharmacy management software solutions Steve Wubker Platform acquisition
Sterigenics Outsourced sterilization services Michael Mulhern Recapitalization and one add-on acquisition
XIFIN SaaS-based billing solution for diagnostic service providers Lâle White Platform acquisition and two acquisitions

In the last 12 months, the Healthcare team has also capitalized on the healthy equity markets, low interest rates, robust M&A activity and strong business performance by selling five portfolio companies for a combined enterprise value of $5.2 billion.

Capella Healthcare

  • In August 2015, GTCR completed the sale of Capella, our acute care hospital company, to Medical Properties Trust, Inc. (NYSE:MPW), a Birmingham, Alabama-based, self-advised real estate investment trust, for $900 million.
  • GTCR formed Capella in partnership with Founder Dan Slipkovich in 2005 to acquire acute care hospitals that serve rural and suburban markets.
  • Today, Capella is a premier provider of healthcare services and one of the largest for-profit hospital companies in the U.S.
  • The company is dedicated to helping hospitals deliver a new level of healthcare to their communities through innovative market strategies, experienced leadership and capital investment to grow services and expand the regional influence of each hospital.

Cord Blood Registry

  • In August 2015, GTCR completed the sale of CBR, the world’s largest newborn stem-cell company, to AMAG Pharmaceuticals, Inc. (NASDAQ:AMAG), a specialty pharmaceutical company that focuses on maternal health and hematology, for $700 million.
  • In September 2012, GTCR partnered with life sciences executive Geoffrey Crouse to acquire and transform CBR. As part of the transaction, Mr. Crouse joined the company as CEO.
  • Together, GTCR and Mr. Crouse recruited a senior management team, transformed the digital marketing strategy and further leveraged CBR’s strong industry leadership position to grow the business.

Curo Health Services

  • In February 2015, GTCR completed the sale of Curo, the largest pure-play hospice provider in the U.S., to Thomas H. Lee Partners.
  • Curo is a management partnership formed as part of GTCR’s Leaders Strategy™ with Larry Graham, the former President and COO of Amedisys (NYSE:AMED), a leading home health and hospice company.
  • In April 2010, GTCR backed Mr. Graham to selectively acquire home health and hospice providers to create a premier post-acute care company.
  • In less than four years, Curo built the nation’s largest pure-play hospice provider serving more than 7,200 patients across 161 locations in 19 states.

Devicor Medical Products

  • In December 2014, GTCR completed the sale of Devicor Medical Products to Danaher Corporation’s (NYSE:DHR) Leica Biosystems, a leading provider of anatomical pathology solutions and automation used to advance cancer diagnostics.
  • Devicor began as a management partnership with Tom Daulton, formed as part of GTCR’s Leaders Strategy™ to build a leading medical device company focused on interventional procedures.
  • In 2010, Devicor completed its initial platform acquisition with the successful corporate carve-out of the Mammotome breast care business from Johnson & Johnson (NYSE:JNJ).
  • As a result of the successful carve-out and transformation, Devicor was able to create a standalone, fully integrated, global medical-device business and was able to leverage its commercial platform to complete several complementary tuck-in acquisitions.

Sterigenics

  • In May 2015, GTCR and Warburg Pincus completed a recapitalization of Sterigenics, the leading global provider of mission-critical sterilization services to the medical device, pharmaceutical, food safety and high-performance materials industries. Post-recapitalization, GTCR remains a large investor in Sterigenics today.
  • In executing The Leaders Strategy™, GTCR partnered with veteran executives Michael Mulhern and Phil Macnabb to acquire Sterigenics in 2011.
  • Since that transaction, the business has experienced a significant transformation. The management team has grown and improved the platform with operational enhancements, investments in additional capacity and the execution of highly strategic acquisitions.

Cedar Gate Technologies, Greenwich, CT

CEO: David Snow

Management Partnership: August 2014

In August 2014, GTCR partnered with David Snow to form Cedar Gate Technologies. Mr. Snow, a 34-year veteran of the healthcare industry, most recently served as the Chairman and Chief Executive Officer of Medco, one of the nation’s largest pharmacy benefit managers. He joined Medco as Chairman and CEO in March 2003 prior to Merck’s spin-out of Medco as a separate publicly traded company. He served as CEO until the company’s approximately $34 billion sale to Express Scripts (NASDAQ:ESRX) in 2012. During Mr. Snow’s tenure, Medco’s revenue grew from $34 billion to more than $70 billion, creating over $28 billion of enterprise value.

Cedar Gate Technologies, headquartered in Greenwich, Connecticut, focuses on acquiring and developing healthcare data and analytics technologies and technology-driven services as part of a strategy to build a leading business in the industry. GTCR and Mr. Snow believe the data and analytics space represents an attractive and growing segment within healthcare technology. Cedar Gate seeks to invest in companies, products and services that help providers and payors understand and manage risk effectively as they transition toward value-based reimbursement.

GTCR may invest up to $200 million of equity capital to support management’s strategy. Mr. Snow serves as Chairman and Chief Executive Officer of Cedar Gate, and he and his management team will invest alongside GTCR.

Cole-Parmer Instrument Company, Vernon Hills, IL

CEO: Bernd Brust

Management Partnership/Platform Acquisition: August 2014 | Recent Acquisition: October 2015

As part of The Leaders Strategy™, GTCR partnered with Bernd Brust to acquire Cole-Parmer Instrument Company (“Cole-Parmer”) from Thermo Fisher Scientific (NYSE:TMO) for approximately $480 million in August 2014. Cole-Parmer, headquartered in Vernon Hills, Illinois, is a leading global manufacturer and distributor of specialty laboratory equipment and instruments to a diverse range of customers in pharmaceutical, biotech, healthcare, chemicals, food and other research-based or regulated markets.

GTCR’s relationship with Mr. Brust dates back to 2009, when he was Chief Commercial Operations Officer at Life Technologies Corporation and responsible for a $3.5 billion global business. Prior to partnering with GTCR, Mr. Brust was President and CEO of Qualicaps, a leading provider of capsule manufacturing and processing equipment for pharmaceutical companies, which was sold to Mitsubishi Chemical Holdings in 2013.

Founded in 1955 and acquired by Fisher Scientific in 2001, Cole-Parmer offers a portfolio of industry-leading brands and private-label products in niche applications to fulfill important needs in the market. The company has deep technical expertise across a range of specialty products in the field of fluid handling, test and measurement, electrochemistry and other laboratory products. The company sells its products across a range of end-markets to a diverse, global customer base.

In addition to driving new organic growth, Mr. Brust and Cole-Parmer are actively pursuing expansion through strategic M&A opportunities. To date, Cole-Parmer has completed three add-on acquisitions, building out its proprietary product portfolio and expanding its geographic presence.

Correct Care Solutions, Nashville, TN

Executive Chairman: Jerry Boyle
CEO: Jorge Dominicis

Management Partnership: September 2011 | Platform Acquisition: December 2012 | Recent Transaction: March 2015

GTCR acquired Correctional Healthcare Companies, Inc. (“CHC”), a leading outsourced healthcare provider to correctional facilities, in December 2012. The CHC investment opportunity grew out of GTCR’s proactive efforts targeting a range of healthcare cost-containment opportunities.

In July 2014, CHC merged with Correct Care Solutions (“CCS”), a portfolio company of Audax Management and Frazier Healthcare Ventures. The successful combination of CCS and CHC created a strong player in the attractive and growing public jails segment of the market and one of the largest companies in the outsourced correctional healthcare industry. The combined company leverages the scale of its infrastructure and clinical capabilities in order to capitalize on the continuing trend toward outsourcing. The combined company operates under the CCS name and is led by CCS Founder and Executive Chairman Jerry Boyle and CEO Jorge Dominicis.

In March 2015, CCS completed the add-on acquisition of a provider of healthcare and claims processing services to the Federal Bureau of Prisons.

Crealta Pharmaceuticals, Lake Forest, IL

CEO: Ed Fiorentino

Management Partnership: August 2013 | Platform Acquisition: December 2013 | Recent Acquisition: January 2014

In August 2013, GTCR entered into a second partnership with Ed Fiorentino, the former CEO of Actient Pharmaceuticals, to form Crealta Pharmaceuticals. The company is focused on acquiring specialty pharmaceutical companies and products as part of a strategy to build a leading company in the industry. Target acquisition opportunities include products that are already approved or currently marketed, as well as late-stage development drugs.

In December 2013, Crealta completed its first product acquisition, Migergot, from G&W Laboratories. In January 2014, Crealta acquired substantially all of the assets of Savient Pharmaceuticals, Inc., following a successful bankruptcy auction bidding process. As part of the transaction, Crealta acquired Savient’s key product Krystexxa, a novel biologic treatment for chronic refractory gout administered by intravenous infusion. Crealta is committed to providing support to patients and their healthcare providers so that Krystexxa can continue to be used safely and effectively. Mr. Fiorentino and his team continue to look for attractive acquisition opportunities in the specialty pharmaceutical market.

Maravai LifeSciences, San Diego, CA

CEO: Carl Hull

Management Partnership: March 2014

In March 2014, GTCR partnered with Carl Hull, former CEO of Gen-Probe, to form Maravai LifeSciences. The new company, headquartered in San Diego, California, is focused on acquiring companies and products within diagnostics and life sciences as part of a strategy to build a leading business in the industry. GTCR and Mr. Hull believe the diagnostics and life sciences space represents an attractive and growing segment within healthcare. Maravai is looking to invest in companies and products that help researchers and clinicians improve the efficiency and quality of healthcare.

Mr. Hull is a 30-year veteran of the diagnostic and life sciences industry. Prior to partnering with GTCR, Mr. Hull was CEO of Gen-Probe, a market leading molecular diagnostic company. While at Gen-Probe, Mr. Hull led a strategic transformation that focused the company’s resources on its core growth areas of clinical diagnostics and laboratory automation. His leadership helped reposition the business for commercial growth and ultimately generated significant interest from strategic buyers. In April 2012, Mr. Hull led the sale of Gen-Probe to Hologic (NASDAQ:HOLX) for $3.7 billion.

GTCR may invest up to $300 million of equity capital to support management’s strategy. Mr. Hull is the Chairman and Chief Executive Officer of Maravai, and Eric Tardif has joined as Executive Vice President of Corporate Development to help identify, execute and manage acquisitions.

Rx30 (Transaction Data Systems, Inc.), Ocoee, FL

CEO: Steve Wubker

Platform Acquisition: June 2015

GTCR acquired Rx30 in June 2015. Rx30 is a leading developer and provider of pharmacy management software solutions to the independent retail, hospital, long-term care and specialty pharmacy markets. As part of the transaction, GTCR partnered with Rx30’s CEO, Steve Wubker. Dedicated to the independent pharmacy market for the last 35 years, Rx30 offers a suite of market-leading software solutions to enable prescription filling, pharmacy management and other critical functions for its pharmacist customers. The company has deep expertise in providing cutting-edge technology solutions to help pharmacy owners streamline their operations, improve financial performance and better manage their businesses. Rx30 sells its technology to pharmacies across the United States, Mexico and the Caribbean.

The acquisition of Rx30 is the result of GTCR’s continued proactive efforts in the healthcare IT sector. Following GTCR’s recent investments in XIFIN and Cedar Gate Technologies, Rx30 represents GTCR’s third recent investment within healthcare IT, an area of focus for the firm over the past several years.

Sterigenics International, Deerfield, IL

CEO: Michael Mulhern

Management Partnership/Platform Acquisition: March 2011 | Recapitalization: May 2015 | Recent Transaction: August 2015

In 2011, GTCR partnered with Michael Mulhern, the CEO of two previous GTCR investments, to acquire Sterigenics, the leading global provider of contract sterilization and ionization services for medical devices, food products and other advanced applications. Headquartered in Deerfield, Illinois, Sterigenics provides comprehensive outsourced sterilization services to its customers through a network of more than 40 sterilization facilities across all major global geographies.

In August 2014, Sterigenics closed the acquisition of Nordion Inc. (NYSE:NDZ), a global health sciences company providing radioactive cobalt for sterilization of medical devices and a portfolio of medical isotopes for clinical use in healthcare facilities. This acquisition created the only vertically integrated sterilization services company in the world.

In May 2015, GTCR recapitalized Sterigenics in partnership with Warburg Pincus and Sterigenics’ management team.

In August 2015, Sterigenics acquired São Paulo, Brazil-based, Companhia Brasileira de Esterilização (“CBE”), the largest specialist in sterilization and microbial load reduction in Latin America. The acquisition of CBE broadens Sterigenics’ global footprint and enhances its best-in-class capabilities to serve customers and compete for new sterilization services business.

Sterigenics continues to leverage and expand its global network of service centers to better serve existing and new customers. The company is seeking additional acquisitions in the sterilization market, as well as in the broader medical device services market.

XIFIN, Inc., San Diego, CA

CEO: Lâle White

Platform Acquisition: July 2014 | Recent Transaction: May 2015

GTCR acquired XIFIN in July 2014. XIFIN is a market-leading SaaS provider of billing and reimbursement solutions to clinical diagnostic laboratories. As part of the transaction, GTCR partnered with Founder and CEO Lâle White. XIFIN’s technology platform enables end-to-end connectivity from patient to payor, linking together the many stakeholders in healthcare delivery and optimizing for the best business and patient outcomes. XIFIN’s technology plays a critical role in a laboratory’s financial performance. As a result, the company has a stable recurring revenue base with high renewal rates and a history of consistent growth.

XIFIN completed two acquisitions in 2015, adding product capabilities to XIFIN’s technology platform and expanding the company’s market presence. The company continues to enhance its position as a market-leading provider of health economics optimization across the diagnostic service provider landscape by adding new customers and evaluating add-on acquisitions and strategic partnerships.

Cole-Parmer

  • In December 2014 and July 2015, Cole-Parmer raised incremental senior secured term loans under its existing credit facility to partially finance two of its three add-on acquisitions, Environmental Express and Ismatec.
  • Golub, DDJ and Angel Island provided the incremental loans to support these strategic acquisitions.

Rx30

  • In June 2015, Rx30 raised new senior secured term loans to partially finance the acquisition by GTCR.
  • Ares, BDCA, Macquarie, Golub Capital and Orix Capital served as joint lead arrangers and joint bookrunners.

Sterigenics International

  • In May 2015, Sterigenics raised new credit facilities, including a revolving credit facility and new senior secured term loan, as well as senior unsecured notes, to partially finance the recapitalization of Sterigenics by GTCR and Warburg Pincus.
  • J.P. Morgan, Jefferies, Barclays and RBC Capital Markets acted as bookrunners for the syndication process.
  • In August 2015, Sterigenics raised incremental senior secured term loans to finance the add-on acquisition of CBE.

XIFIN

  • In November 2015, XIFIN completed a debt recapitalization and dividend transaction with lenders Antares, CapitalSource, NXT and Northwestern Mutual.

Associate

Danny McDonough joined GTCR in 2015. Prior to joining GTCR, he worked as an Investment Banking Analyst in the Healthcare group at Credit Suisse. Danny graduated magna cum laude from Georgetown University with a BA in international economics.

Associate

Ari Sunshine joined GTCR in 2015. Prior to joining GTCR, he worked as an Investment Banking Analyst in the Mergers & Acquisitions/Corporate Finance group of Morgan Stanley. Ari graduated summa cum laude and Phi Beta Kappa from Washington University in St. Louis with a BA in mathematics and economics.

Healthcare Team Contact Information

Constantine (Dean) Mihas

Managing Director, Group Head

312.382.2204

Sean Cunningham

Managing Director

312.382.2260

Josh Earl

Principal

312.382.2168

Ben Daverman

Principal

312.382.2069

John Kos

Vice President

312.382.2229

Hunter Craig

Vice President

312.382.2263

Luke Marker

Vice President

312.382.2156

Healthcare Investments Since 2000

Actient Pharmaceuticals

ATI Physical Therapy

Capella Healthcare

Cedar Gate Technologies

Cole-Parmer Instrument Company

Cord Blood Registry

Correct Care Solutions

Crealta Pharmaceuticals

CuraScript

Curo Health Services

Devicor Medical Products

GeneraMedix Pharmaceuticals

Graceway Pharmaceuticals

Health!Quest Partners

HealthSpring

LabPortal

Managed Healthcare Associates

Maravai LifeSciences

Morton Grove Pharmaceuticals

Ovation Pharmaceuticals

Rx30

Sterigenics International

Universal American (f/k/a APS Healthcare)

XIFIN