VC turns hospital operator

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.

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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?

Potential Targets

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.

 DEALS, DEALS, DEALS

• 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.

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