VC turns hospital operator
General Catalyst wants to buy a health system
Happy Sunday. Here’s what we’ve got today…
A single headline deal
Why venture investor General Catalyst wants to buy a health system for itself
The week’s deal sheet, plus the latest memo from Oaktree’s Howard Marks
1. Antares considers a bid for Hayfin.
• Bloomberg reports Antares Capital is considering a takeover bid for London-based private credit firm Hayfin, which currently manages around €30 billion.
• Antares, backed by CPP Investments and Northleaf Capital Partners, sees the deal as a potential entrance to the European market, accelerating its expansion timeline vs. a standalone approach. Hayfin has a strong EU presence, and its recently raised €6 billion direct lending fund is one of the region’s biggest.
• Antares itself boasts an AUM of $64 billion, meaning a combination would create one of the world’s largest independent private credit platforms. Originally part of GE Capital, Antares was sold to CPP in 2015 and has been a benefactor of private credit’s emergence over recent years.
• Hayfin, founded in 2009, is owned by British Columbia Investment Management Corp. The group had reportedly been evaluating potential exit options for the holding — the Antares interest is preliminary and could turn into a full sale process.
PRESENTED BY LYKEION
The traditional equity research model is struggling — it’s now a sell-side cost center providing little value to institutional investors.
That’s left an opening for top independent firms like Lykeion. Founded by a team of former research analysts and portfolio strategists, Lykeion publishes monthly investment-grade insights on key thematics across business, finance, and geopolitics.
Their bottoms-up research report provides a nuanced view of early trends shaping the macro environment and is read by a client base that includes both private and public markets investors. Learn more and access a free report here.
In its own words, General Catalyst has set out to “transcend venture capital.”
Their plan to do so centers around the acquisition of a health system. It’s part of a broader “health assurance” initiative, a long-term thesis focused on transforming healthcare through what can be roughly summarized as tech-forward value-based care.
Executing that thesis is newly launched company Health Assurance Transformation Corporation (HATCo). General Catalyst says HATCo’s goal is to work with other health systems "to help them develop and execute their transformation journey to health assurance.”
Put simply, the fully-owned health system is meant to serve as a proof of concept for new digital health products — demonstrate efficacy to ease full launch into a challenging market.
Taneja’s Personal Quest
General Catalyst CEO Hemant Taneja has been cooking up the health assurance thesis for years, iterating on his approach as he’s climbed the firm’s ranks.
Taneja moved to Silicon Valley in 2010, notching a series of notable wins in the years since. One of his first checks was Stripe’s seed round, which opened up a lead role on its Series B and participation in its C, D, and G rounds. Other high-profile investments include Anduril, Snap, Gusto, and Grammarly.
An admirable track record, but Taneja’s deepest conviction was diabetes management company Livongo. He became deeply interested in its novel approach to chronic disease management and championed a business that got a lukewarm reception nearly everywhere else.
Tech columnist Eric Newcomer, at the time a Bloomberg reporter, recalled his efforts to source stories from Taneja:
Livongo ultimately sold to Teladoc for $18.5 billion in 2021, at which point General Catalyst held nearly 25% of the business.
Along the way, Taneja found time to author UnHealthcare: A Manifesto for Health Assurance, a reflection on his experience with the U.S. healthcare system and a vision for its change. Most of that vision was centered on the proliferation of Livongo-style businesses across the healthcare continuum — digital-first, AI-enabled, outcomes-based, and accessible.
Putting General Catalyst in the Mix
Taneja wanted General Catalyst to play a leading role in his health assurance movement. His thinking: “venture [had] gotten comfortable and lazy,” and it was his responsibility to do something about it.
And the first health assurance attempt was not entirely comfortable — General Catalyst launched a $500 million SPAC in 2020 named Health Assurance Acquisition Corp. The well-publicized effort failed to find a target and liquidated two years later.
His next attempt in the space was centered around the 2021 launch of General Catalyst’s health system network, featuring partnerships with 20 systems in an effort to provide a testing ground for new products and services.
Whether the partnerships didn’t move the needle or Taneja wanted a second chance at his failed SPAC, he’s now on to his third major health assurance foray.
This week’s HATco launch appears a like-for-like reincarnation of General Catalyst’s SPAC thesis, though with potentially fewer structural challenges. It’s set up as a permanent capital vehicle with a goal to invest over a decades-long time horizon.
Former Intermountain CEO Marc Harrisson has been tapped to lead the business. Neither he nor General Catalyst provided specifics, other than noting that they’re working to build scaled platforms that can move beyond the fragmented point solutions common in today’s healthcare landscape.
The information they did disclose: HATco’s target is to close on a health system acquisition within its first year of operations.
Not as Nonsensical as It Appears
In some ways, the move does make sense. Hospitals and health systems are a notoriously difficult end market to sell into. They have long sales cycles, are financially pressured, must deal with unions and internal politics, and often have unsophisticated management teams.
That means most products need to demonstrate an immediate ROI to break in. A promise of improved patient outcomes or future financial performance usually isn’t good enough.
Frustratingly, even clearly obvious cost savings or financial guarantees may not be enough — health systems aren’t always rational actors. Maybe a department VP sees a product as a threat to their job, the CFO golfs with the incumbent provider’s local leadership, or the health system is drowning in an Epic implementation with no capacity to onboard.
An owned system in which you can immediately roll out new products, with the opportunity to quickly iterate, would be a meaningful competitive advantage. But, is it a clear enough improvement over General Catalyst’s existing partnerships to be worth the headache?
Less-than-ideal financial conditions across the health system universe mean there continues to be active deal flow, though maybe not of the quality General Catalyst is hoping for.
If the venture investor is up for it, there are bargains available.
Last week, Mercy Iowa City nearly sold for $20 million to the University of Iowa Health System (UIHC), though a competing last-minute $40 million credit bid won the deal. UIHC had floated a $605 million offer for the same asset just two years earlier.
Taneja will probably opt for a target that isn’t on the brink of collapse, though what better way to showcase the health assurance model than the turnaround of a failed system.
• ExxonMobil (NYSE: XOM) agreed to acquire Pioneer Natural Resources (NYSE: PXD) for $59.5 billion.
• Stone Point is in discussions over the acquisition of Truist Financial’s (NYSE: TFC) insurance brokerage unit at a $10 billion valuation
• Bristol Myers Squibb (NYSE: BMY) agreed to acquire oncology-focused Mirati Therapeutics (Nasdaq: MRTX) for up to $5.8 billion.
• Marcelo Claure has acquired a stake in Brazilian investment firm EB Capital.
• I Squared Capital is nearing a deal for bus operator Arriva, backed by Deutsche Bahn, for around €1.6 billion.
• EQT agreed to acquire Australian veterinary chain VetPartners Limited for $1.4 billion.
• Blackstone, EQT, OTPP, and KKR are said to be evaluating a potential $2.5 billion bid for Aster DM Healthcare, a Dubai-based hospital chain.
• WellSky, backed by Leonard Green and TPG, acquired post-acute care service provider Corridor from HealthEdge Investment Partners.
• Atlassian (Nasdaq: TEAM) agreed to acquire video communications platform Loom for $975 million.
• CPPIB, PSP Investments, and British Columbia Investment Management Corp. are planning to sell their stakes in Chile-based power company Transelec in a deal that could be worth a combined $3 billion.
• Sixth Street, KKR, BayView Asset Management, and CardWorks have agreed to acquire Goldman Sachs-owned installment lender Greensky.
• Apollo Global Management agreed to acquire Restaurant Group (LSE: RTN) for £506 million.
• Platinum Equity is the favorite to acquire Jacobs Solutions' government-focused critical mission solutions business.
• TPG Rise Climate agreed to acquire AmSpec, an energy and commodities testing business, from Olympus Partners.
• Triton agreed to acquire Trench, Siemens Energy’s high-voltage parts unit.
• Wind Point Partners acquired UK-based pet food manufacturer Assisi Pet Care from Harwood Private Equity.
• EU antitrust regulators ordered Illumina (Nasdaq: ILMN) to sell Grail, the cancer testing business it bought without regulatory approval.
• Blackstone has held discussions with Walt Disney Co. (NYSE: DIS) over acquiring a stake in its India business.
• SK Capital agreed to acquire natural foods business J&K Ingredients from Core Industrial Partners.
• Arctic Wolf agreed to acquire cybersecurity platform Revelstoke.
• KKR is seeking a buyer for Q-Park, a Dutch parking lot business that could be worth around €4 billion.
• Apollo Global Management and JB Capital are nearing a joint bid for Vodafone's (LSE: VOD) Spanish unit.
• Ara Partners acquired German magnetics manufacturer Vacuumschmelze from Apollo Global Management.
• Bonaccord Capital Partners acquired a minority stake in healthcare buyout firm Revelstoke Capital Partners.
• Huron Capital acquired electrical contracting business RK Electric.
• Citigroup (NYSE: C) agreed to sell its China wealth management business to HSBC (NYSE: HSBC).
• PGT Innovations (NYSE: PGTI) rejected a $1.9 billion bid from Koch-backed Miter Brands.
• Schaeffler (DE: SHA) is planning to launch a €3.64 billion tender offer for German powertrain manufacturing company Vitesco (DE: VTSC).
• BC Partners and Pollen Street Capital-backed Shawbrook Bank are considering a new $740 million bid for UK-based Metro Bank.
• Sandal maker Birkenstock, backed by L Catterton, raised $1.5 billion in its IPO. Shares are now trading at $36, a $6.8 billion maket value, after initially pricing at $46.
• Bain Capital has postponed IPO plans for Virgin Australia Airlines, per Bloomberg.
• Saronic, a developer of autonomous shipping technology, has raised $55 million in Series A funding. Caffeinated Capital led, with participation from 8VC, Andreessen Horowitz, and the U.S. Innovative Technology Fund, among others.
• Gutsy, a cybersecurity governance and process mining startup, secured $51 million in seed funding. The round was co-led by YL Ventures and Mayfield.
• Capital Rx, a pharmacy benefit manager and administrator, raised $50 million from backers including Atlantic Health System and Transformation Capital.
• AstronauTx, a biotech focused on Alzheimer's and other neurodegenerative diseases, raised £48 million. The round was led by Novartis Venture Fund and included Bristol Myers Squibb and the Dementia Discovery Fund.
• ScyllaDB, a startup specializing in big data database solutions, secured $43 million in funding. Eight Roads Ventures led, with participation from AllianceBernstein and Qualcomm Ventures.
• Prophecy, developer of a low-code data engineering platform for enterprise data teams, raised $35 million in a Series B round. Insight Partners and SignalFire co-led, with participation from JPMorgan and Databricks Ventures.
• LimmaTech, a biotech focused on vaccine development, secured $37 million in Series A funding. The round was co-led by Adjuvant Capital, AXA IM Alts, and Novo Holdings.
• TileDB, a data management provider, raised $34 million in Series B funding. The round was led by AlleyCorp and included participation from Lockheed Martin Ventures and Intel Capital.
• Upvest, a provider of digital wealth management infrastructure, raised €30 million. The investment was led by BlackRock and included contributions from Bessemer Venture Partners and Notion Capital.
• TA Associates invested in Kinective, a company offering workflow and analytics software for the banking sector. The investment was made alongside existing backers OceanSound Partners.
• Warburg Pincus raised $17.3 billion for its 14th global flagship fund.
• Macquarie Asset Management is raising $4 billion for a new Asia-Pacific infrastructure fund, as well as up to $5 billion for a separate renewables fund.
• Incline Equity Partners raised $1.9 billion for its sixth buyout fund.
• Appian Capital Advisory raised $2 billion for its third mining-focused fund.
• AllianzGI raised €3 billion for its first semi-liquid private markets fund.
• AEA Investors raised $1.3 billion for its fifth small-cap buyout fund.
• Hillhouse Capital is hoping to raise between $900 million and $1.1 billion for an Asia-focused private credit fund.
• Mubadala Capital raised $710 million for its second Brazil-focused fund.
• CIVC Partners has raised $825 million for its seventh fund.
• Beyond Next Ventures is targeting $168 million for its third fund.
• Monarch Collective closed a $139 million debut fund focused on women’s professional sports.
1. Oaktree’s Howard Marks releases new memo.
• Marks believes the investment environment has fundamentally changed and that old strategies will no longer cut it. — Further Thoughts on Sea Change, Howard Marks
2. A syndicated loan briefing.
• Industry group LSTA held its annual conference last week, and a repository of its decks is freely available for those interested in a market and trends update. — Loan Syndications and Trading Association Updates
Interested in partnering with Transacted? If you’re a brand looking to connect with an engaged financial audience, we’re here for it. Please reach out.