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'Hands-on' private equity reduces emerging market risk.

Summary: By Chad P. Floe, Operating Partner and Managing Director, Corporate Finance and Youssef Haidar, Partner & Managing Director at TVM Capital Healthcare Partners

Private equity in emerging markets such as the Middle East and North Africa region is almost all about driving the growth of young and promising companies, so investors must be prepared to roll up their sleeves and get involved in day-to-day operations if they are to be successful.

Because the private healthcare sector is still only just emerging as a force in the region's economies, investment opportunities tend to be in companies that need growth capital and also expert support to professionalise. This is in contrast to private equity in many parts of the world, where investors can pick from a range of possibilities, including turning around failing firms, and financial restructuring.

As such, emerging market investors need to focus on how they can add value to a firm's operations. And that means it is vital to be a specialist--to use sector expertise to promote efficiency, good governance and compliance, as well as to create new business opportunities.

At TVM Capital Healthcare Partners, for example, we have taken a methodical and detailed approach to investment. We have undertaken extensive research to identify gaps in emerging market healthcare provision, worked with government agencies to establish private sector licencing frameworks, and employed our global network and a strong 'operations group' to support growing businesses.

TVM Operations Group is essentially an accelerator company of around 25 time-tested people that provides general management support. This includes providing management and strategy development, as well as back office services, such as legal, information technology, marketing, accounting, human resources.

Setting up this ecosystem is a significant investment in itself. But it brings huge value-creating benefits for the companies we invest in, and reduces risk for TVM Capital Healthcare Partners, our limited partners and our external investment partners and co-investors.

It means that in their early years, our portfolio company management teams are left to concentrate on doing what they do best--providing high quality healthcare services and aggressively growing the business. Access to part time resources and economies of scale at TVM Operations Group mean that each company can save time and costs, and still has access to and can employ high quality specialist skills.

Meanwhile, as investors, we have an excellent view on day-to-day realities and can help to find solutions to any issues the companies may face. This encourages good corporate governance across the company, which is highly valued, especially in an emerging market context.

When TVM Capital Healthcare Partners invested in the UAE's long-term ventilated care company, ProVita International, Medical Centre, in early 2010, we started to put this system in place. TVM Operations Group supplied strategy advisory, interim management and back-office services in the early years, and later also helped to arrange international strategic partnerships with Spaulding Rehabilitation Network and Joslin Diabetes centre to help build a centre of excellence.

As the company grew and matured, it was able to take on more of the functions itself. So by the time TVM Capital Healthcare Partners exited in mid- 2015--through a sale to London-listed NMC Health Plc--ProVita had become a completely stand-alone, independent, strong and well-managed provider of high quality care.

TVM Operations Group is currently serving three portfolio companies in the Middle East and India, and will again be involved in many of our new investments, including in Southeast Asia. It is a vital part of our success as our hands-on strategies serve to mitigate operational and governance risks.

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Publication:Banker Middle East
Date:May 9, 2016
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