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Navigating the Competitive Deal Sourcing Market
Episode 1714th September 2021 • Across the Table • McGuireWoods - Holly Buckley & Geoff Cockrell
00:00:00 00:24:01

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Paul Barrett isn’t afraid to get in the weeds to help an entrepreneur in the healthcare industry fulfill their vision. He and his team at Argosy Healthcare Partners pride themselves on seeking out organizations with smaller EBITDAs.

The way Paul sees it, both sides win with this approach. Argosy avoids the stiff competition that comes with high-worth companies; and the lower middle market companies Argosy pairs with are able to forge ahead with more capital support. 

That said, Paul knows it’s not always easy to buy and build a relatively small company. But it pays off, he insists. 

“It’s super important for us to find the right business and quality of founder, and we can do a lot of that from due diligence,” Paul says in this episode of Across the Table. 

“We can build a personal relationship with the founder who is looking for capital to execute on acquisitions, or to clean up their cap table, or are just ready to grow a little more quickly.” 

Paul is always keeping an eye on interesting areas in the healthcare world — which are not hard to come by these days. Thanks to the pandemic, evolutions in medical science, and a quickly aging population, there is plenty for a creative capital provider who really wants to make a difference to watch out for. 

Tune into the episode to hear more about Paul’s business strategy at Argosy Healthcare Partners, and what he thinks about the future of funding in healthcare entrepreneurship.

 

Featured Experts

Name: Paul Barrett 

What he does: Paul is a managing partner at Argosy Healthcare Partners, where he works in fund management, developing, assessing and strategizing on investment opportunities.

Organization: Argosy Capital 

Words of wisdom: “We focus on the small stuff. That's a key part of our thesis and strategy in trying to differentiate ourselves in a super-competitive market.” 

Connect: LinkedIn

 

Acquired Knowledge

Top takeaways from this Across the Table episode

★    Smaller EBITDA means less competition. Venture capital is very competitive, especially in the lucrative healthcare industry, and especially over companies with a high EBITDA. Instead of constantly fighting to source deals, Paul and his team look at companies with smaller EBITDAs that they can help grow.

★    Don’t back away from less sophisticated founders — but set boundaries. Argosy’s strategy of investing in lower middle market companies means the firm often deals with boards and founders who aren’t necessarily well-versed in the business world. This allows for a really hands-on approach to buying and building a company, but requires tougher work from the jump. Paul does set limits: He and his team don’t work with companies with founders who are retiring, and EBITDAs under $1 million. There is a limit to what they can do.

★    Pay attention to subsectors and trends. Argosy Healthcare Partners is passionate about supporting companies in specific subsectors of the healthcare industry, for example healthcare staffing and post-acute care. Pay attention to social and cultural trends — as well as events like the COVID-19 pandemic — that change the landscape and determine which subsectors have the potential to heat up.

 

Episode Insights

[1:26] How it began: Paul talks about Argosy Capital’s 30-year history of focusing on small- and medium-sized companies, and supporting majority controlled and founder-owned healthcare service companies.

[02:23] The small stuff is a big deal: Paul discusses Argosy Capital’s strategy of investing in smaller, less-competitive opportunities. The ultimate goal, he says, is to support founders in executing their visions.

[03:48] Game on: Paul says that prioritizing organizations with less than $10 million in EBITDA has helped eliminate competition in the past, but more capital providers have started taking an interest in these opportunities.

[07:00] Getting in the weeds: Dealing with less business-savvy founders pays off when you get to work intimately alongside them, to help grow their companies from the ground up.

[12:51] Focusing on industry subsectors: Argosy focuses on specific subsectors in the healthcare industry, particularly healthcare staffing, which has been particularly dynamic for the past several years — making it interesting for capital providers.

[14:35] The pandemic changed the healthcare market: For example, the traveling nurse business boomed during the pandemic, whereas there have been downturns in other parts of the healthcare industry, like elective surgery.

[16:24] The Boomer effect: As the Baby Boomer generation ages, home health and hospice will become more lucrative. Paul is interested in investing in post-acute companies that are aimed at this population, because the market is going to continue to grow.

[17:57] Investing in innovation: Paul says another fascinating part of the healthcare industry right now is biotech and life sciences.

[20:14] Macro market insulation: Paul discusses how funding in lower middle market healthcare companies provides some insulation from macroeconomic trends that impact other industries.

 

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This podcast was recorded and is being made available by McGuireWoods for informational purposes only. By accessing this podcast, you acknowledge that McGuireWoods makes no warranty, guarantee, or representation as to the accuracy or sufficiency of the information featured in the podcast. The views, information, or opinions expressed during this podcast series are solely those of the individuals involved and do not necessarily reflect those of McGuireWoods. This podcast should not be used as a substitute for competent legal advice from a licensed professional attorney in your state and should not be construed as an offer to make or consider any investment or course of action.

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