Deal in Focus: Waterland sticks to buy-and-build strategy with Median

The acquisition of AHG Allgemeine Hospitalgesellschaft in July not only marked the 15th acquisition for Waterland's rehabilitation and post-acute treatment clinics, it was also one of the largest deals for the group, with AHG comprising 45 sites. The GP says the acquisition brought Median's annual turnover to €1bn and made it one of the five largest private clinic chains in Germany.

Waterland entered the German post-acute clinic market in 2011 with the succession-driven acquisition of RHM Klinikgruppe, which comprised 21 clinics. The company and its backer went on to buy five smaller clinics in small German towns such as Hohenlohe and Buchberg, before taking over Median's 45-strong chain from Advent International and Marcol Healthcare in October 2014 and renaming the group.

The buy-and-build strategy then continued with 11 single clinics and small chains such as Lielje Kliniken's four sites, before AHG scored another large addition in July.

The owners decided to sell earlier this year and launched a small auction process at the start of May. Things went quickly from there" - Carsten Rahlfs, Waterland Private Equity

Waterland partner Carsten Rahlfs says the large number of add-ons highlights consolidation opportunities in the market: "There are 1,200 post acute clinics in Germany. Five years ago the largest chain held 30 clinics and had a market share of 3%. We now hold 130 clinics. The merger of health insurers and pension insurers has spurred this development." Rahlfs claims that Waterland's strategy of approaching companies directly instead of entering organised auction processes has proven successful as well.

Although it did involve a limited auction process, the AHG deal was also sourced via Waterland's network: "We have been in touch with AHG's management for three or four years. The owners decided to sell earlier this year and launched a small auction process at the start of May. Things went quickly from there," says Rahlfs.

Waterland is currently undertaking due diligence for three more clinics. The investor usually makes seven to eight add-on acquisitions for its platforms, but it hopes to get up to 20 for Median before exiting in two to three years. Both IPO and trade sale opportunities will be taken into consideration, says Rahlfs: "Median is large enough for an IPO, but we also receive interest from trade buyers and private equity firms."

Modernising process
Besides the buy-and-build strategy, Waterland is also working on digital improvements for the platform: "We work on the digitisation of internal processes, for example the automatic processing of bills or more efficient drafting of doctor's letters. Median is also working with a consultant on the development of an app that would enable patients to stay in touch with the clinic after their stay. Rahlfs says the launch will happen in a few weeks' time.

Less than a week after the AHG deal announcement, Waterland had already taken the next step for its Median group, carving out Atos from the platform as a separate group of three clinics in Heidelberg, Munich and Braunfels.

The acquisition of AHG has been financed through a term loan facility provided by IKB and SEB. Both institutions underwrote the 2014 bridge loan for Waterland's acquisition of Median and the refinancing of the bridge loan in October 2015.

With the integration of AHG, the group has a turnover of €1bn, with 15,500 employees. AHG's 45 hospitals, treatment centers and outpatient clinics have 4,000 beds and 2,500 employees.

People
Waterland Private Equity Investments - Carsten Rahlfs (partner).
Median - André Schmidt (CEO).

Advisers
Equity - Hengeler Mueller (legal); KPMG (financial due diligence, tax); Rothschild (debt advisory); McKinsey & Company (commercial due diligence); CBRE/Valteq (property due diligence).

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• Topics
• DACH
• Healthcare
• Build-up
• Germany
• Waterland Private Equity
• Deal in focus