You could do very well in large-cap, private equity by consistently generating solid returns at scale and volume. It’s great for large institutions and PEs that have the time and resources to compete at slews of auctions and zoom through portfolio after portfolio to close deals, quarter after quarter.

After years in this kind of environment, Harry Eichelberger of Archimedes Health Investors found independent sponsorship in physician provider services to be more exciting, more personalized, and more entrepreneurial. On this episode of the podcast, he discusses his approach to healthcare investment and how he came to focus on physician services.

Also on this episode of Deal-by-Deal, hear from McGuireWoods Partner Holly Buckley on digital healthcare and healthcare IT.

“We will continue to see an increase in traction on deals in healthcare IT, and there’s going to be a real race to consume the valuable assets in that sector,” Holly says.

The demand has never been greater for fully invested, sustainable healthcare. COVID just brought it all to the forefront. Yet considering the events of the past year and a half, the healthcare niche is even more relevant than ever for the independent sponsor.

Meet Your Hosts

Name: Rebecca Brophy

Title: Partner at McGuireWoods

Specialty: Rebecca focuses her practice on advising private equity funds, other institutional investors, and strategic acquirers in connection with mergers and acquisitions and other complex business transactions.

Connect: LinkedIn

Name: Holly Buckley

Title: Partner at McGuireWoods

Specialty: Holly focuses her practice on corporate healthcare transactional work and regulatory matters. She primarily counsels private equity funds and healthcare clients and is Chair of the firm’s Healthcare Department. 

Connect: LinkedIn

Meet Your Guest

Name: Harry Eichelberger 

Title: Founder and Managing Partner of Archimedes Health Investors

Specialty: Harry was a healthcare private equity, growth capital, and venture capital investor before founding Archimedes Health Investors, a private equity firm, focused on healthcare, in 2015.

Connect: LinkedIn

Acquired Knowledge

Top takeaways from this episode

★    For a successful physician practice management venture, focus on alignment. The healthcare space went through two major rollups, one in the 1990s and one in the early 2000s. During those years, the relationship between management and physicians was strictly transactional, and during these downturns, their bonds quickly ruptured. When management treats physicians like true partners, they share incentives, are invested in each other’s progress and are positioned for long-term growth.

★    Bet on Healthcare IT. COVID brought the forward movement of healthcare IT and digital healthcare, but this sub-sector of healthcare has been gaining traction for some time due to demographic shifts. These include: aging Baby Boomers, a declining workforce, the ever-present need to do more with less, and increased demand for telemedicine and other remote solutions. In short, the opportunity for digital health innovation is only expected to grow. 

Episode Insights

[00:47] Independent sponsorship in healthcare: McGuireWoods Partners Rebecca Brophy and Holly Buckley discuss the transition from PE to independent sponsorship within the healthcare space with Harry Eichelberger, Managing Partner at Archimedes Health Investors.

[02:54]: Bigger, faster funding: Funds in mature PE are raising more money and dispersing it more quickly.

[4:01]: The sweet spot: To Harry, lower-middle and growth equity are the most exciting healthcare areas because there is a need for the capital, expertise, and strategy an independent sponsor can offer.

[6:27] Dig into business models and alignment: Archimedes is deliberate about which health care spots it chooses to fund. The mid-2000s taught Harry and his colleagues valuable lessons about paying attention to long-term alignment with business models: how do companies bring value to their customers and how are they paid for? Radiation oncology was operating in a reimbursement environment positioned to fail when cuts were instituted, for example.

[8:59]  History repeating: In the 1990s, physician practice management (PPM) models often failed because the physicians and the management companies were not aligned. The PPM provided little oversight or systems to help physicians operate their practices to adapt to market fluctuations. It was focused on quick money and IPOs, so it wasn’t built to last.

[11:14] A different approach: Archimedes partners with physicians by tying their compensation to productivity instead of paying them a fixed salary. They create sharing mechanisms so that doctors can have access to IT, investments, systems, and management services. They also create alignment through equity ownership of the parent company. 

[13:28] The individual advantage: Many big, institutional sponsors are prohibited from looking at smaller deals. Not so for the individual sponsor, and starting small is an opportunity to grow a business the way you want to, not according to a pre-existing set of constraints and policies.

[15:27] Start small: Find deals. Conduct due diligence. Raise capital. This is the basic playbook for starting out as an individual sponsor. It’s extremely challenging, so keeping your ambitions modest in the beginning makes the most sense.

[17:41] Present as an entrepreneur, and use your relationships: Harry found CEOs took him more seriously when he emphasized that working with them was his own venture, rather than part of a cushy job with a PE firm. He was also fortunate to have many strong contacts from his days in the PE world that he could leverage.

[18:46] Lean is nimble: Without the usual hours-long, extended meetings and flurry of memos that PE brings to mind, the individual sponsor can get more done in less time.

[20:54] Proof in crisis: During the most devastating moments of the pandemic, some healthcare companies showed up. Others didn’t. This underscored the importance of company culture. Archimedes was in the middle of due diligence when COVID-19 hit, and Harry says this turned out to be a great opportunity to see how the company they were evaluating responded to stress.

[24:27] 2021 outlook: Harry and Rebecca are both seeing delas being pulled forward. They discuss the deal outlook for the rest of the year and beyond and underscore why having the right partner is critical.

[28:28] Next big investment areas: Harry and Holly talk about what specific areas of healthcare they are bullish on. Harry likes physician services, while Holly is focused on opportunities around healthcare IT and digital health.

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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.

Hi, this is Rebecca Brophy. Welcome to another episode of Deal by Deal. Today, we're speaking with my partner, Holly Buckley, who is the head of our Healthcare Department at McGuireWoods, as well as Harry Eichelberger who is with our committees healthcare investors. Holly, do you want to introduce yourself briefly?

Sure. Thanks Rebecca and thanks for having me on the podcast. As Rebecca mentioned, I'm the Chair of the McGuireWoods Healthcare Group. I spend most of my time in the private activity space on both platform and platform deals and platform add on deals and ongoing support work, also I spend a fair amount of time in the traditional healthcare space and hospitals and health systems. I've been very excited to be here today and to join this discussion with you and Harry.

Harry, would you like to introduce yourself a bit?

Yeah. Great. Thank you for hosting me. Thanks Rebecca. Thanks Holly. Thank you to the McGuireWoods team. I'm Harry Eichelberger, founder of our Archimedes Health Investor, an independent sponsor focused on health investing. I've been doing healthcare, private equity, growth equity, and venture capital investing since 2003. The first part of my career was spent at an upper middle market buyout firm called Oak Hill Capital. I left in 2015 to found Archimedes and since then have built four platforms all in healthcare.

Harry, thanks for that, and we all had the pleasure with working with you on some of your platforms and we've been thoroughly impressed with you and your team. You gave a little bit of the background of your Genesis and private equity and how you moved into being an independent sponsor. Can you give a little bit more feedback on really what was going through your brain when you made the jump into the independent sponsor world?

Sure. Well, the large cap sponsor world, which I came from, was a great learning experience. We took a very deep dive approach to investing, putting business plans together. Thinking about the long term, thinking about trends over 10, 20, 30 year period and meeting executive and key opinion leaders across healthcare to really form a view on what where the exciting places to invest. One of the things that's happened in the more mature private equity sector is that funds are raising larger and larger funds and deploying bigger checks faster.

Turns out if you want to make a lot of money in large cap, private equity, the way to do it is not necessarily by generating the best returns, but by generating really good returns consistently at scale and at volume. While that's good for large institutional investors and it's great for the private equity firms who are doing well at it, the lifestyle is a drag. You end up looking at lots and lots of auctions. It's very competitive, there's not a lot of time to get to know each portfolio company or each deal before you close it, and then when you do close it's onto the next one.

So as my old firm matured and started looking at larger deals, I just found that my heart wasn't in it, trying to find these big companies that everybody else looking for. What I thought was exciting in healthcare was the lower middle market and growth equity, where there's more of a need for capital, there's more of a need for the expertise that a sponsor can bring, and there's more of an opportunity to shape strategy and build companies. So it became clear that the exciting part of the market was not where I was spending my time, and I wanted to go do something a little bit more entrepreneurial.

So Harry, as that's fascinating and certainly can see how that transition made a lot of sense. How did you originally get into the healthcare space? Was it [inaudible 00:04:41] or was it very much by design?

It was a little bit process of elimination, so I was a generalist as an investment banking analyst and then moved briefly into a role doing technology, investing on the buy side. It wasn't that exciting to me. Then I quickly transitioned into healthcare. Healthcare is so daunting if you're coming at it from outside, I really spent a lot of time trying to put the pieces together for how the system works and really enjoyed the public policy piece of healthcare. Took a long time, it was a challenge to try to learn the business of investing the business of private equity and at the same time learning the healthcare industry. But once you invest that time and understand it, it's great fun to find problems that need fixing in healthcare.

I couldn't agree more in, I think healthcare is by far the best boat to be in. How would you advise folks who want to get more in tune with the healthcare industry and become more expert to do so there's obviously a lot to be learned by just learning on the job, but how did you get smart in the healthcare space?P

So we were pretty deliberate about trying to pick our spots within healthcare. We would put together very detailed business plans, starting with demographic trends, then moving into different sub sectors within healthcare. Who are going to be long term winners and losers, and then those are pretty obvious places to start when you look at business planning, and another thing, we took it a step deeper and spent a lot of time on business models. This is where I think investors, whether it's a new investor or seasoned investor, really are well served by not just looking at a sub sector, but how do the companies within that sub sector bring value to their customers? How are they paid for bringing them value to the customers? And oftentimes different companies grow up with different models and it can wind up really being a difference between winners and losers. As an example, we spent time in physician services in the radiation oncology space in the mid 2000 which, if you're in healthcare services, it's a great place to be.

But radiation oncology is probably one of the worst. Given the reimbursement environment, we set up our business, however, to be really closely aligned with the physicians and therefore had a much better partnership and much more flexibility when the reimbursement cuts happened, all the physicians came around the table with the management team to think about how to navigate them. By contrast, there were other competitors in the sector who paid the physicians a fixed salary. So when reimbursement got cut, the management company took those cuts a 100% to the bottom line and the physician still expected to get paid their same salary. Yeah, we didn't need to think about demographics and the aging baby boomers and find growth that way. But it's important to dig a little deeper and understand the unity economics and the alignment and business models within those [inaudible 00:08:15] sub sectors.

I have a follow up question to you Harry, on that. I mean, obviously there was a series of roll up that happened in healthcare 10, 20 years ago. Do you view the current roll up strategies as being drastically different from an alignment perspective than the last time around?

Yes, absolutely. So I was not around for physician services, roll up 1.0 in the 90s, [inaudible 00:08:46] a long time, but not that long. But I was there to see the aftermath of a number of these PPM's that blew up. Essentially the reason that they didn't work out is because there was no alignment between the physicians and the management company. It was essentially, physicians would contribute their practices to this larger entity. Their incomes would go down because that slice of income that was taken away from the physicians was what turned into [EBITDA 00:09:23] for the PPM. And then the PPM provided very little in the way of management oversight or systems or ways to improve clinically or operationally to the physicians.

It was strictly a financial trade. Let's pull together a bunch of doctors, cut their salaries, turn it into EBITDA and then take it public, and it didn't last because there was nothing about that business model that was really built to last. As the physicians became disgruntled because they weren't making much money and they weren't getting much in exchange for the deal, the answer, instead of trying to create more alignment or more value or partner with the physicians more, the answer was, do more deals.

Sell the leaky bucket with more partnerships and the whole thing came all around pretty quickly. I contrast that now with the way we partner with physicians today, where the most important thing we think about is alignment with the doctors and we get that alignment in a number of different ways. So one way is just their day to day compensation is productivity driven. So we want to encourage the physicians to keep working hard and those that work the hardest and see the most patients, should obviously see their incomes improve. The second way we create alignment is through sharing mechanisms. We really make sure that we're bringing value to the doctors. Value in terms of management services, access to IT, investment and systems. As we see benefits from that, oftentimes the physicians have a way of sharing in those benefits. Then the third way that we create alignment with the physic through equity ownership in the parent company, we get our partners to think like equity holders.

We treat them like true partners. They hold equity, just like my investors and I do in the company. I tell them, on the one hand they're working for the MSO, but on the other hand, I'm working for them because I'm trying to generate equity returns for their rollover equity, just like the rest of my investors. Those three ways of creating alignment ensure that we're all thinking for the long term, thinking about how to, instead of just turn this into some kind of quick flip to take public, like the PPMs of the 90s, or some harp hazard roll up which still exist in some specialties today. We're thinking for the long term, we're trying to take a number of individual physician practices and turn them to an institution that has much more staying power and longevity.

Harry that's really interesting. I think both Holly and I have seen in practice how you work really hard to align everyone's goals between the physicians, between your investor group, between our committees in a way that just ultimately makes a big picture, ongoing success makes sense to everyone. One of the questions I have in being really familiar with your work on what I would put is in the more complicated spectrum of independent sponsor healthcare deals is, when you first started out doing healthcare transactions, can you talk about what those look like in terms of EV and in terms of complicated factors, like number of physicians, and number of investors you work with. Did that grow over time or you really kind of, your whole career, been shooting whales?

It's a good question and it's a real differentiator between an independent sponsor and a more traditional sponsor. And that is the constraint around deal size. There are many larger sponsors, institutional sponsors. They're not allowed to look at a deal under 50 million dollars in equity or under a 100 million or 200 million or something like that. The flexibility of an independent sponsor to start however small they need to, to build the business, I think it's really important. One of the things that we've done as an independent sponsor is had that ability to start small. So in my prior life, we were trying to write 200 to 400 million dollar equity checks. That's usually not realistic as an independent sponsor, but we have invested across our four platforms well over 200 million dollars. So we've built pretty big companies, often starting small. We have an anesthesia platform that we've helped create called Natural Partners in healthcare.

The first deal we did there had $451 000 and we [inaudible 00:14:29] nine providers. Three years later, that platform is up closer to 300 providers. So that flexibility to start small on the one hand, it's adding complications because there isn't management in place, there isn't infrastructure in place. We had to build that up all of our ourselves. It adds complexity on the one hand, but on the other hand, we get to control the quality of that infrastructure build to our own standards, rather than taking the risk of looking at somebody else's platform, where they may be covering a bunch of warts or have done some questionable M&A deals right up before they sell, and then we're stuck cold in the bag after you win the auction.

One of the things that if you could speak to a younger version of you, a less seasoned version of you, would you suggest starting small on your first deal on the healthcare, [inaudible 00:15:27].

Yeah, I would start small. I think one of the challenges of being in an independent sponsor is finding the capital obviously. So you have to find the deals first and then you have to do the diligence, get conviction around that deal. You can't screw it up or your career as an independent sponsor is going to be really short and all that takes a lot of time, and then once you've done that, then you got to go hit the fundraising circuit. You want to have your initial targets, the patient sellers, often, I've found folks who are going to roll over into the deal or something like that is very important because they need to understand how the funding model works and how much time it takes. That's easier, I think, with a smaller group than it is with a big company that's maybe looking into maximize value in the near term and, and have a date certain in mind when they want to close.

That makes a ton of sense. Is there anything else that you would, if you're, again, talking to relative newcomer to independent sponsored world, whether it's healthcare specific or just generalized. Any piece of advice that you wish you had when you were first starting out, do you feel you can relate to that audience right now?

So coming out of a larger sponsor background, I thought that it would take a lot more money to go find deals because you got to pay the consultants, and you got to fly first class, and you got to chase auctions and spend all this money on diligence, and then it turned out that was totally not necessary. So there's a lot you can do being scrappy and pretty. When you're running a private equity firm out of your personal bank account, it forces some discipline on you around the deals you look at, and how you're spending your time, how you're spending your money on diligence. So I would encourage young folks thinking about going the in independent sponsor direction. Don't be scared off, or don't be discouraged by how much you might need to spend on diligence. You can usually [ham 00:17:39] that down, make it more manageable.

The second thing that I would encourage folks to do is really use your relationships. I was fortunate in that I had been in private equity for many years before I struck out on my own, but I was really heartened by the support that I got from CEOs that I had worked with and folks in the industry that I had worked with. You get a lot of support from people when you take a risk and do something entrepreneurial and you can use that support once you get out on your own, ask people what they see as interesting happening in the market, ask folks to be advisors to you, use that network. I found that I got a lot more credit for being entrepreneurial, CEOs started to treat me a little bit more like one of them, somebody who's taken real personal risk and operating risk rather than being just another private equity guy in New York, sitting pretty with a big salary and not having to do deals or having to not matter so much if they worked out or not.

That I found to be a real benefit when I sat out on my own. Then the third thing I would say it was a big change to the good that I wasn't expecting was, in a large institutional private equity environment there are lots of meetings, lots of memos, lots of committees. Your Monday meeting goes from being two hours to six hours, to eight hours as you get more senior and taking that out of the equation unlocks a lot of capacity. So I found that I was able to get a lot more done without those institutional burdens on me when I went out on my own.

Great. I mean, it sounds like being lean and nimble is really the advantage here and if you're willing to take the risk, and can make the right connections, then you've got a lot more flexibility.

Yeah, exactly. It's about being lean and nimble, but usually you think of lean and nimble being fast, in this case, we're lean and nimble, but pretty slow not [inaudible 00:19:54].

Makes perfect then. Well, switching gears a little Harry, this has obviously been one of the most bizarre years or 18 months or so that I've certainly worked through, would love to hear a bit of a roundup from you of how you viewed the market trends over the last year to 18 months in terms of deal activity, and what's been going on in the industry.

There's quite a bit of activity clearly. I mean, across all sectors and healthcare in particular. I think the COVID crisis was really clarifying in a number of ways for folks in healthcare. First, it was a reminder of why we do what we do. We had an investment in an anesthesia company where we picked really high quality Anesthesiologists to be our partners. When COVID hit, they were on the front lines, they showed up, they supported the hospitals and the surgeons that they were working with, and there were other groups where their physicians, when the chips were down, they didn't turn up. It was a reminder that we are here to support healthcare providers and it was just really encouraging to see that we built a quality network and they really came through when needed.

It's an interesting observation Harry, in terms of how your providers responded and we obviously have a pretty broad cross section of the market in terms of the funds that we work with and others that we see out there. I think there was a really broad cross section in terms of how different groups fed over COVID and how the different platforms and the groups of physicians and other providers really reacted. Because we had, I mean, as I'm sure there was a lot of businesses who were very concerned with respect to cash flow and liquidity in the early stages, when it was very unclear how long shutdowns may last and what exactly the impact was going to be and whether the government was going to do anything. I think frankly, there was a lot to be said for the importance of culture in these companies during this crisis and I think culture really had a strong impact on how the company set throughout, and so I'd be curious on what you saw around that, not just with your company, but outside in the market.

Yeah. So we were in the middle of due diligence on the company when COVID hit. It was very unclear as to whether the deal was going to be able to get done, but we did help the company think through liquidity issues, think about how to handle COVID inside their organization. We put together what best practices were across our portfolio and help them, just trying to support, even though it wasn't a portfolio company, just trying to support this group, trying to get through a challenging time. At the same time, we got to see how they behaved in the crisis, and to your point, Holly, they had a really strong culture and it held up in the crisis and they did a great job of treating their employees fairly, serving their community, maintaining high morale and making sacrifices in order to keep serving that community. So it wound up being an interesting time where you got to see how people behave in a foxhole. Deals are always stressful and they can be revealing in terms of people's personality.

But this test was much bigger. One of the things that we did through COVID, we stuck by all of our portfolio companies. We stuck by all of the yields that we had under LOI. We did not use it as a reason to re-trade or try to be grabby. And we closed on the transactions that we had under LOI pre-COVID and we closed with them. Sometimes we may have changed the structure around a little bit to reflect the risks at the time, but we didn't try to take a pound of flesh or use it as an opportunity to re-trade because it became clear that the COVID impact, while there would be long term lingering effects, that real crunch last year was somewhat temporary.

Harry, in terms of the rest of 2021, we're certainly seeing a lot of deals that may have otherwise been 2022 deals getting pulled forward with the goal of closing before December 31st, for a variety of reasons, including just books getting to be continually nervous about tax changes. Are you seeing the same thing as us? I assume the answer is yes, but just want to be curious in terms of just different market sectors and what they're seeing.

Yes and no. So there was a lot of talk and a lot of concern around tax changes around long term capital gains and that if somebody was thinking about selling in 2022 or 2023 to try to get the sale done in 2021, that was a really active discussion over the summer, especially among physician groups, a lot of times they do really make decisions based on taxes. But I think that there is some reality setting in, first of all, that the tax changes may not be as drastic as folks feared, but also that in the scheme of things, picking a financial partner, capital partner, is a really big decision and you have to pick the right one.

You shouldn't let some concern about tax policy drive you into the arms of somebody who's not the right partner. So I've been somewhat encouraged with a bunch of groups that thought they had to rush and get something done by the end of the year, that as they've seen what's out there, they're starting to take their time and realize that, over the course of a career, especially if a group is going to be rolling equity and picking a partner or building a platform over time, that's way more important than a year to year changes and tax rate.

That's interesting and that's encouraging because we certainly had a little bit more [inaudible 00:26:35] forecast from other folks from thinking that we're going to have such a [inaudible 00:26:41] deals that close in the next three and a half months, that things are going to just completely fall off quarter one of 2022. But I fully take your point in that from a long term perspective, particularly when so much of the value of one of these transactions is embedded in rollover equity that having the right partner to maximize value going forward is so much more important than the ups and downs in tax laws that, frankly could look different this year to next year to two years from now. That's just interesting feedback and I'm glad to hear it.

Well, it also helps us, in terms of picking the types of folks who we want to be partnering with too, because if somebody does want to run head long into a sale by 12/31/21 and they don't care who it's to, they're just trying to maximize cash in their pocket today. That's not a good partner for us, and if those are their priorities, that's fine. One of the things that I would caution against for any physician groups that are thinking that way is that you're opening yourself up, not only to somebody who could be a bad long term partner, but you're given all the negotiating leverage to the other party, and the deal you think you have in October or November or 2021 may not be the same as the deal you wind up with, well by 12/31.

I will cosign that because certainly I've had a number of times in my career where just the time pressure has on both buy and sell sides, have led to taking terms that could have been more favorable if everyone was willing to take a breath, absolutely. In terms of just healthcare specifically, is there an area in healthcare, and this is something I'd like to hear from both you and Holly on that you believe are going to be the next big area of new investment from private and independent sponsors.

I have spent a lot of time in physician services, and I think that there will be continued investment there from independent sponsors, from traditional sponsors. We are still in the early pandemic middle innings, depending on the specialty. There's still a need for capital, a need for management talent that private equity can bring in benefits to scale, and so reasons for these physicians if they want to remain independent, to think about a capital partner. So there are some of specialties that are very far along in terms of the consolidation trends, things like dermatology and the like, but then there are others where it's early, cardiovascular, women's health.

Some of these areas where I think sponsors like us who have a playbook, have a history of working with physicians and building companies will continue to be active for a while. I also think that we're seeing real depth in the market for exits of these physician services businesses, whether they are taking public or selling to a larger private equity firm to take them into the next phase of growth or to a strategic. So I think that this whole area has a lot of runways left to go.

I would add to that and I totally agree Harry, and I think that there are some areas like dermatology and dental that we thought would already bright up by now, but are still going incredibly strong, and I feel dental deals will just keep going for forever. The area I would talk about a little bit is outside of the physician provider services realm, and that's digital health and healthcare IT, I think, we're just seeing a tremendous amount of interest and growing volume in that area. I think some of that was inevitable. Some of it was propelled forward more by COVID with telemedicine and other digital solutions to remote care. But I think also as other trends in the healthcare industry, such as the declining workforce, aging baby boomers, and so forth, created the need to do more with less, and that's what drives technology. So I think we will continue to see an increase in traction on deals in healthcare IT, and I think there's going to be a real race to consume the valuable assets in that sector.

Yeah. I totally agree. I've spent a lot of time in healthcare IT and tech enabled services in my career. One of the things that I've found has been the best way to approach that, sector is through starting with a problem that needs to get solved and usually that's informed by executives at a payer or a provider or clinicians who have something that they're trying to fix in workflow or revenue cycle management to clinical or what not. Once you find these areas that need fixing then going and finding smaller companies or finding management teams that can build products to solve these challenges. It's very hard as an independent sponsor to just show up at an auction or some fundraise for a big hyped up healthcare IT business. So we still have to be a little bit scraper and probably a little bit more early if we're going to participate in some of these health tech businesses.

Switching gears a bit, one of the things that I'm curious on in terms of just the bigger, broader, independent sponsor market and I tend to ask this every time I talk to independent sponsor and more formal [inaudible 00:32:59], so they interest me because I'm also having the backend conversations with the bankers as well, and we're obviously seeing a lot of auction deals at this point here. Harry do you steer away from those deals or are you willing to [inaudible 00:33:14] auction deals? And if so, what is the reaction that you get as independent sponsor and hasn't modified over the past five or six years?

That's a good question. Let me start with the reaction, which is that it is less of a barrier than you would think. So every time we've wanted to participate in an auction where we've had some expertise in the sector or had an angle or a management team that we were working with, and we reached out to a banker to try to get included, we've been allowed in. So I think the perception that homeless sponsors can't close or can't post, I think is starting to wane in a lot. That said, I find it hard to justify the time and money spent on an auction. There are lots of great companies that get auctioned, but a lot of times the winner is the group that's willing to go really hard at diligence early and spend money on McKenzie or BCG or [Vain and Orlie K 00:34:21] [inaudible 00:34:21] soon, and still only have one in four or five chance.

I just find that, that doesn't work for the resources we have and the time we have, we really do try to focus on proprietary deals where much more involved in building the company from scratch. Early on it, sometimes those companies need 10 or 20 million dollars in equity, and sometimes they need a 100 or 200 million in equity, and we're going after these sectors, because we're passionate about them and we see problems that need to be fixed or areas for a company that does things a little bit different from other competitors. That just lends itself, I think, this business building lends itself to a little bit more proprietary deals.

Great. So Harry, just final wrap up question and this is my favorite question to ask everyone, what are you most excited about for next year?

I'm really excited about our portfolio. We launched two new platforms this year, one in orthopedics called M2 orthopedics, one in ophthalmology called Panorama. Both of which have great physician leadership, physician partners, great clinical models, great management teams and a lot of runways, so that's super exciting. One of our other portfolio companies [inaudible 00:35:52] health just raised a large round from Clayton, Dubilier & Rice and then from the Morgan health arm of JP Morgan is working to replace the space that was created when Haven Health fell apart with the JV between Berkshire Hathaway and Amazon and JP Morgan, and there's a lot to do with empowering primary care and taking care of the under 65 population.

We're very actively involved with our portfolio companies and supporting them and excited to see them grow. And then at the same time, there's a fair amount of interesting stuff in the pipeline. There are entire sectors within a healthcare that could benefit from the shift from inpatient to outpatient or from future service to value based care and we want to be right at the intersection of all that stuff. So really excited about the deals we have in the ground, and then also excited about learning new sectors and taking some of what we've learned from partnering with over a 1000 physicians to new subspecialty.

Harry, I want to thank you for all your thoughts here today. I can again, just say from personal experience that I've seen you with 50 balls in the air before and get a deal done in a really impressive manner, and I've enjoyed working with you. I think you do a lot of really good lessons to pass along to the independent sponsor community. One of the things I like most about this community is how collaborative it is and how willing almost every most more seasoned independent sponsor I run into is to share knowledge with folks that are newer, just starting out, just being introduced to the space. I think because so much of this community is really hyper focused on certain sectors and really doing what you do well, which makes it a little bit, in some ways unique and less competitive than other forms of investing. And Holly I also want to say thank you for bringing your expertise in both healthcare and healthcare transactions to this conversation.

Rebecca, it's a pleasure, and Harry, it's been great to reconnect with you again.

Yeah. Thanks Holly. Thanks Rebecca I really enjoyed the discussion.

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