Persistence Capital’s Niche in Healthcare Investing

Founded by a physician in 2008, Persistence Capital Partners is, unsurprisingly, focused on healthcare. More specifically, it bills itself as the only private equity fund exclusively focused on high-growth opportunities in Canadian healthcare.

The founding partner, Dr. Sheldon Elman, had a small medical practice in Montreal. He then shifted the focus of the practice to preventive healthcare in Canada, and it ultimately became Medisys Health Group, which was taken public in 2002. Then, in 2008, Persistence Capital (PCP) was formed and raised its first fund; its first investment was to take Medisys private and split it into four businesses.

Stuart M. Elman, managing partner at PCP (who also happens to be Dr. Elman’s son and business partner for the last 15 years), says that the firm invests almost exclusively in Canadian companies, although it will at times invest in businesses that choose to expand outside the country’s borders.

“In Canada, a big part of the [healthcare] spending—70 percent—is provincially funded, with the remainder being funded by employers, insurers, and individuals out of pocket,” Elman says. “In certain respects, Canada is where the U.S. was 10 years ago in the evolution of different verticals.”

Aspects of the Canadian healthcare system lend themselves to private equity investment, says Elman. There is no single Canadian healthcare system, like in the U.S., but instead 10 separate systems. “There are some commonalities, but a lot of differences in [each of] the provinces,” he says. “It lends itself well to a specialist [PE] fund.”

PCP’s most recent investment is mdBriefCase, a business providing free online continuing medical education for doctors, nurses, pharmacists, and other healthcare professionals that has a significant market share in both Canada and Australia. Elman says that in this transaction, they made a significant investment, alongside the management team.

Although all of PCP’s portfolio companies are different, the main thing the firm focuses on is investments that have capacity for significant organic growth, roll-up, or consolidation transactions.

The firm did such a transaction with its investment in Anima-Plus Group, a company with five veterinary hospitals in Quebec. There was an opportunity to consolidate a fragmented veterinary-services market in Canada, Elman says. Since PCP’s initial investment in 2014, it has made several tuck-under acquisitions.

One of the firm’s most successful, and earliest, transactions was Medisys IMA Division. The Independent Medical Assessment division of Medisys , which was a leading provider of independent medical evaluations to property and casualty insurers, law firms, corporations, government agencies, and other insurers, was acquired by PCP in 2008. In the time that the company was in PCP’s portfolio, the revenue doubled and the EBITDA was nearly tripled, Elman says. It was sold in 2011 to SCM Insurance Services.

“That one was only organic growth,” he says.

Looking more broadly, Elman sees a couple of trends in Canadian healthcare. There is ongoing pressure on the government and employers to find better ways to drive efficiency, and also a consolidation of both pharmaceutical firms and pharmacies. Going forward, PCP plans to continue its investment thesis of leveraging its healthcare operating expertise, experience and its network to add substantial value to its investments, he adds.