Montagu’s experience and expertise in healthcare, as well as our ability to identify and invest in high-growth areas early, sets us apart.

• With so many private equity firms investing in healthcare, how do you differentiate yourselves and maintain a competitive advantage?

Jabalot: The healthcare sector is heavily regulated and thus complex; maintaining a competitive advantage is challenging given the level of interest from other private equity firms. However, Montagu’s experience and expertise in healthcare, as well as our ability to identify and invest in high-growth areas early, sets us apart. In our last three funds, Montagu IV, V and VI, healthcare investments made up more than 40% of each fund, and more than 50% in the case of Fund IV – this has always been a significant part of what we do.

We look for businesses that are differentiated with hard-to-replicate know-hows, which is the flipside of complexity, and most of our deals are carve-outs or primary buyouts. Once partnered, we prioritise building strong relationships with management teams and focusing on patients first to drive innovation and growth.

Finally, we have a rigorous approach to due diligence and risk management, which helps us mitigate potential challenges and maximise returns for our investors.

 

 

• What specific trends in the healthcare sector are you most focused on?

Jabalot: There are several global trends in healthcare that we are particularly focused on. First is the growing decentralisation of healthcare, which involves providing more care outside of hospitals and clinics, including remote home monitoring and decentralised clinical trials for new drugs, such as our investment in Nemera, which designs and manufactures drug delivery devices for the self-administration of drugs by patients. The focus on ‘ageing well’ is another trend, illustrated by our 2022 investment in HTL Biotechnology, the world leader in providing critical pharmaceutical-grade biopolymers used in aesthetics and other medical applications.

Another interesting trend is innovation in clinical treatments, such as minimally invasive surgery, robotics, implants, cell and gene therapy, and immuno-oncology. We are also excited about the potential for AI and machine learning to facilitate early diagnostics and predictive medicine. These trends provide both defensive characteristics and opportunities for significant returns on investment.

• Which healthcare subsectors do you focus on and why?

Jabalot: Our focus within the healthcare sector has historically been on medtech, including surgical implants and surgical instruments, such as our respective investments in RTI Surgical and Intech in 2020 and 2021, and medical devices such as insulin pens and asthma inhalers. We have also looked at diagnostics and pharma products, and artificial insemination for the veterinary market with our 2021 investment in IMV Technologies.
Our approach is to identify positive long-term drivers and invest in companies that are at the forefront of these trends. Intech, which specialises in surgical instruments for robotics, aligns with the trend towards innovation in clinical treatment. Overall, our focus within the healthcare sector is broad, but we partner with innovative companies that are well positioned to take advantage of positive long-term trends.

 

• Can you give us a quick overview of how you work with your Full Potential Partners’ team and the management teams of your portfolio companies?

Tim Cochrane: Most of our deals tend to be carve-outs. We’re investing in companies that are growing fast and often want to expand internationally, launch new products, optimise their processes and take costs out. That means we’ll spend the first period of time with the management team putting together a plan for the business, articulating how we’re going to work with the CEO and their team to create value.

Montagu has completed 28 carve-outs since 2002.

• Are there any specific considerations you need to mitigate during a carve-out process, and what are the major risks when investing in the sector?

Cochrane: There are a lot of complexities in a carve-out process. The main challenge is to fully understand what you are acquiring and what you need to have a standalone business. This involves the regulatory team, finance, IT operations, sales and marketing. It’s important to assess the cost base and to make the right assumptions around what is required for the standalone cost base, as well as the one-off costs to separate the business. Underestimating costs can have a huge impact on the return of the business, and underestimating regulatory issues can also have a significant impact.

Another challenge is that the management team may have never done a carve-out before, so finding talent to help manage the process and separate the business is important; you may need to appoint an interim management team to help the CEO manage the process on a short-term basis. It’s also important to have a permanent solution for those roles.
Montagu has completed 28 carve-outs during the last couple of years, and we have a detailed playbook on how to diagnose the cost base and what is required to ensure the business can successfully stand alone. We have a large network of talent that we use repeatedly for different carve-outs, and a track record of delivering on budget and on time, giving us comfort and confidence in our underwriting case.

 

Jabalot: The healthcare sector is heavily regulated, and this creates considerable risk. Regulations touch everything, from commercial relationships with customers or suppliers to product innovation, quality standards, and manufacturing practices. Despite this, the sector is still attractive to investors, as the complexity and regulations create differentiation among businesses. Montagu looks for businesses that bring something unique to the table and have a right to exist long term. The company scouts the market for opportunities and meets with potential sellers and management teams to understand their ecosystem and business evolution.

 

Cochrane: Despite the complexity of the sector, Montagu’s distinctive investment approach – by driving growth through partnership – ensures we can continue to thrive as a carve-out and sector specialist, bringing more to the table than just financial backing. We will continue to leverage our playbook and experience to help ensure the next generation of healthcare innovators reach their full potential.