Dubai: Specialist fund manager TVM Capital Healthcare Partners has launched its third funding programme to round up $250 million (Dh918.25 million). But unlike with the other two rounds that looked at purely start-ups, the new fund will be used to target businesses in the medical field that have racked up “three to five years” of operations and with a management track-record.

TVM Capital has already identified at least three potential investment opportunities through the new fund. These include a UAE-based business that is into pharma distribution and a speciality cancer treatment facility.

The fund operator had made quite a splash two years ago when it made the first exit, selling its interests in ProVita International Medical Centre to NMC Health for $160.6 million. (ProVita is into long-term medical care and has bases in Abu Dhabi and Al Ain.) For the new fund, TVM Capital expects to have the $250 million in hand within “nine months or so”.

“The only way to do something different from all those buying hospitals was to create assets,” said Hoda Abou-Jamra, founding partner. “Private equity with their billions are looking at hospitals. Governments are looking at hospitals. They don’t need us. It’s too competitive.”

Instead, TVM Capital will seek out “things that are small and ready to grow,” said Abou-Jamra. “In that arena, there’s so much to do. Emerging markets were so behind in growth on speciality medicines. There’re lots of opportunities to come up with new things.

“We do ‘growth capital’ — we go at the level of the entrepreneur, whether the company has some money or not. Because we know the industry, we know whether something has the potential to grow even if it not yet profitable.

“Our role is not to buy a company, restructure the management, grow and sell it.”

But aren’t valuations across the region’s health sector seeing sharp increases? If yes, wouldn’t that impact on future returns?

“Valuations are increasing when funds have too much money and too little assets and they need to spend money,” said Abou-Jamra. “Unfortunately, then valuations do go up. But we don’t get into that — we don’t do auctions [to buy up assets]. We take companies that are not yet profitable.”

In the last three years, there have been quite a few high-profile transactions in the industry, with leading hospital operators in the UAE acquiring new assets in Saudi Arabia. Even within the UAE, the deal pipeline has been pretty fluid, with the bigger names buying up smaller clinics or speciality service providers.

At some point, TVM Capital hopes to do a repeat of the ProVita success with its other interests and those they plan to buy. “Because we take them to growth, we help with the transaction pipeline,” the official added. “The big funds — of $750 million to $1 billion — we give them deals.

“We would even look at business models in Europe that don’t exist here and the organisation wants to come here. With the new funds, we could commit 10-20 per cent in European and American assets as long as these can be brought to emerging markets.

“Investors need to see successful exits happen in the emerging markets exit. What they don’t see now are a lot of exits — they see lot of money. We can bring the specialists here... the growth people who can convert the businesses we commit to.”

A change of strategy on the third

* For its first funding programme, TVM Capital Healthcare Partners initially raised $50 million and then raised it “$100 million to $110 million”. This was in the immediate aftermath of the financial crisis years. For the second round, it raised a further $25 million. Both targeted start-up businesses in the medical industry.

* In the ongoing third round, TVM Capital hopes to raise $250 million. “We won’t do as many start-ups as in the last two — we are going to entrepreneurs who have already built networks,” said Hoda Abou-Jamra. “That way private equity will come in and buy.”

Reporting by Manoj Nair

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