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Baby making is proving fertile ground for private equity. Big operators in the field, including the UK’s CARE Fertility, Europe’s GeneraLife and Theramex are all in the hands of financial sponsors — respectively Nordic Capital, KKR and a consortium of PAI and Carlyle.
No wonder. This is a highly fragmented industry pairing resilient income (volumes rose even in 2009) with healthy growth. By rolling up clinics, bought from retiring doctors looking to cash out or small chains, private equity brings scale, splashy marketing and cross-fertilises knowhow.
Growth looks assured as people start families later. Half a century on from the birth of the first “test tube baby”, 2.5 per cent of US births are via IVF, according to the American Society for Reproductive Medicine. In China one in five babies last year were assisted, says Jinxin Fertility.
Results, and not just for investors, appear supportive. Academics Ambar La Forgia and Julia Bodner, in independently backed research, found that acquisition by a fertility chain lifted IVF success rates by 13.6 per cent. Multiple births, which carry more risks, fell. This, they suggest, may reflect the benefits of both shared best practices and more financial muscle.
That, however, is at odds with the more usual story of the gobbling up of healthcare chains such as care homes by private equity, where fees rise and quality is generally thought to fall. One possible reason is the client base: healthier, relatively well-off people rather than the more vulnerable, ill or elderly.
There are a handful of unicorns, including clinics Maven and Kindbody, and diagnostic testing company BillionToOne. Benefits provider Carrot Fertility is among those on its way to unicorn status. But as with other sectors, the tendency is to stay private for longer, a luxury afforded by bountiful venture capital and even celebrity investors.
Exit opportunities look patchy. A lot is pass-the-parcel: CARE Fertility, GeneraLife — which went on under KKR to buy another clinic Livio — and drugmaker Theramex have all been flipped at least once. Virtus Health listed on the Australian market in 2013 but was back in private hands nine years later, at only a third or so over the initial public offering price. By rolling up clinics — and even opening their own clinics from scratch — financial sponsors have become the trade buyers.
As that suggests, public markets have not proved terribly receptive. Fertility benefits company Progyny listed in 2019 below its proposed price range and has since lagged the broader market. Hong Kong-listed shares in Jinxin Fertility, which concedes to “bottlenecks and difficulties”, are now worth not much more than a quarter of the float price. Private equity looks set to remain the sector’s main breeding ground.
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