New shop on the healthcare block: Gyrus Capital

Julian Longhurst
17 January 2019

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Two former Altaris and Argos Wityu executives have launched a new European mid-cap healthcare strategy, with a first deal imminent.

A matter of months after calling time on a 22-year career at pan-European mid-market investor Argos Soditic (later rebranded Argos Wityu), Guy Semmens has re-entered the private equity market with a new firm. Headquartered in Geneva, Semmens has teamed up with healthcare specialist Robert Watson to create Gyrus Capital. Watson joins from Altaris Capital, the New York-based healthcare specialist PE firm at which he spent four years as managing director, having previously worked for Hg in London, Ares Life Sciences (Ernesto Bertarelli's firm in Geneva), and Sofinova in Paris.

The new investment adviser will target value-based, special situations and transformational investments in sectors driven by demographic and regulatory change, specifically health- and sustainability-related sectors across Europe.

The plan is to add one or two executives to the team over the next year as the venture gathers pace. Additionally, the GP is in the process of assembling a group of senior, experienced operational advisers, including what Semmens described as "some well known names and experts in sector and geographical niches" – both to help with investment sourcing and to add value to portfolio companies.

Two-pronged strategy
In many respects the new venture will draw on Semmens' long tenure at Argos, which also built its reputation on backing value-based deals, sourced from complex, esoteric opportunities such as carve-outs, special situations and the like. But in this case, the focus will be very firmly on the sectors with long-term sustainable growth characteristics, predominately healthcare and life sciences, drawing on the founders' expertise in the area. As Semmens stresses, the composition of the team will enable it to dig much deeper into the sector space than was possible with a more generalist firm, and therefore find value.

"What we are looking at is a value-based approach, which dovetails into sustainable growth sectors," said Semmens. "It's not just a question of going out and buying healthcare companies; it's about finding value and niche opportunities in those areas because we've got a focus on the sector." Despite the firm only being up and running since September 2018, the approach has immediately yielded opportunities in a market that is exceptionally competitive for more mainstream deals. Already the firm is exploring three proprietary investment opportunities, the first of which is expected to be signed imminently.

Tailored funding model
Given the early visibility into initial dealflow, the Gyrus team has set up a mini-fund that has pulled together enough capital to execute initial opportunities. Beyond that, Gyrus will explore longer-term capital needs during 2019. Semmens estimates that Gyrus will deploy €50-100m a year initially and may look at more innovative funding structures to satisfy that need.

As far as backers are concerned, the team at Gyrus has done no formal marketing to date, but already has raised sufficient funds to meet current requirements, and has received in-bound interest from a group of institutional LPs.

As Semmens explains, the attention Gyrus has received from institutional investors might well have been influenced by the reputation of the founding team and the stability this offers, but there is perhaps a more important and practical reason for the interest: "There are LPs out there that are increasingly disillusioned with the classic blind pool fund setup, where they are paying 2% on committed and undrawn capital without any real visibility on what the GP is doing. We're looking to secure sufficient capital to ensure we can fund the investments we have, while generating revenue for the firm from returns and not necessarily fee income."

Beyond year one?
What happens after the mini-fund has been raised and the first investment has been signed is already being considered by the Gyrus team, though officially it is a case of "crossing that bridge when [they] come to it". Semmens points out that Gyrus will still be a first-time fund, despite the impending deal and the track record of its team, so what happens in the second phase will largely depend on them being able to deliver with the initial strategy to generate a good track record. "We're already thinking about how the next phase might look and there are some less conventional options that we're considering," said Semmens. "The classic 10+2 and 2+20 model is under some pressure, and I think, given who we are and where we have come from, we are in a position to look at doing something more creative and original. But that's for later this year. The priority now is to ensure the first investment is everything we hope it is; in which case raising follow on capital for existing relationships and hopefully some new ones should be within our capabilities."