Source Talks ep. 45

Source Talks is a series where we discuss deal origination with PE and M&A pros, in collaboration with David M. Toll.

In this episode, we speak with David Prendergast of Enhanced Healthcare Partners about the firm’s dedication to specific healthcare verticals. Their thematic approach to investing has helped them find exciting new opportunities and led them to being a $1.5 billion healthcare focused private equity firm.

David, tell us about Enhanced Healthcare Partners and the kinds of transactions that you do there.

We focus on three primary verticals within healthcare, that’s multi-site healthcare services, with a bend towards value-based care, software and tech-enabled services, and outsourced pharma services. We are typically partnering with founder-owned businesses, but also, we’ll invest in companies that have raised some limited institutional capital prior to us coming on and partnering with those companies. Writing $25 to $100 million equity checks is kind of our sweet spot for both minority and majority investments in those three verticals.

Tell us about your approach to finding transactions there and Enhanced Healthcare Partners.

We are a very thematic focused investment firm. So, within the three sectors that we focus on- multi-site healthcare services, software and tech-enabled services, and outsourced pharma services- we pick four to six themes at any given time that we’re going incredibly deep on. We take a multi-pronged approach to finding those opportunities. One is the direct outreach where we’re going to map, what are the right 30, 50, 100 privately held companies that we should be proactively engaging with, having qualifying conversations, and then pushing those through our deal funnel as they become more actionable and fit what we’re looking for. On the horizontal side, we leverage the tools that we have to map the right bankers, lawyers, consultants that have spent time in this space and we can go to them and say, here’s our thesis, here’s who we’re working with please keep us top of mind as you have opportunities that could be actionable for us knowing where we invest and what we’re looking for.

David, tell us about the role that technology plays in your GEOS sourcing operation there.

On the intermediaries’ side, Sutton Place Strategies is an incredibly valuable tool that we’ve used here my entire time and a tool that I’ve used throughout my career to identify who the relevant intermediaries and bankers are, who can help us think through a sector, or help us think through executives that could help us grow those businesses and have very targeted outreach.

Tell us about a company that you’re excited about right now and how did you find it?

Our most recent investment is a company called Janus Health. Janus Health is an RCM automation software platform that’s selling into both large health systems as well as the outsourced providers of revenue cycle services to those health systems. We originally came up with that thesis. We built a network of executives that have built rev cycle platforms in the past and done so successfully as we started to think, what is our thesis and what are the types of companies we’re looking for. My team of junior folks and myself ultimately had 52 in-person meetings. In that effort, we got to meet Brendan Downing, who’s the CEO of Janus, more than a year ahead of when we ultimately closed that investment. We’re able to consummate a partnership with Janus earlier this year around February and it’s one we’re really excited about.

David, tell us about a hidden talent or passion that you pursue outside of work.

You know, I travel a lot for work. I like to spend time and money on experiences versus things. And even this last weekend, my wife and I took our son who is turning four next week up to Toronto for two nights and brought him to the Hockey Hall of Fame and to the aquarium. Just getting those experiences, seeing new places and sharing that with my family is when I’m not working, probably my number one thing that I like to pursue.

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