In late July, Scott C. Nuttall, KKR & Co. LP's (KKR) co-president and co-chief operating officer, noted on an earnings call that the healthcare team "is particularly busy right now on the private equity front."
Less than a week after his comments, the New York-based private equity firm teamed with Walgreens Boots Alliance Inc. (WBA) to buy pharmacy services company PharMerica Corp. (PMC) in a deal, unveiled Aug. 2, that was valued at $1.4 billion, including debt.
Days later, KKR-backed PRA Health Sciences Inc. (PRAH) , a publicly traded clinical research organization, agreed to buy Symphony Health Solutions Corp. for $530 million upfront plus potential contingent payments in a deal announced Aug. 7.
And on Aug. 8 came a pair of purchases. KKR-backed Air Medical Group Holdings is acquiring Envision Healthcare Corp.'s (EVHC) medical transportation unit, American Medical Response, in a $2.4 billion transaction.
Separately, KKR is buying Covenant Surgical Partners Inc., an acquirer and operator of ambulatory surgery centers and physician practices, from DFW Capital Partners and others for an undisclosed sum.
"Some of them we were working on for well over a year, some of them less time than that," said Max C. Lin, a director on KKR's private equity team, of the string of healthcare deals. "The timing happened to work out that these were announced at the same time."
Lin is part of KKR's 14-person Menlo Park, Calif.-based healthcare team, led by James Momtazee, which focuses primarily on deals in the Americas.
"We think the healthcare space is one that has been and will continue to be an active one for us for a few reasons," among them the great demographic tailwinds in the space, Lin said.
"Combine that with healthcare being a dynamic space given the innovation that's happening but also a complicated one given the regulatory overlay," he said. "We think there are great investment opportunities."
Asked whether the uncertainty surrounding the fate of the Affordable Care Act has any impact on KKR's investment approach, Lin said it's something to be mindful of. "When looking at companies or sectors directly impacted by something like the ACA repeal, it's a potential outcome we need to [factor in] to our assessment of risk and reward," he said.
As it hunts for opportunities, KKR is not limiting itself to certain sub-sectors. "We cast a pretty wide net by design," Lin said. "We are actively looking at all parts of healthcare."
KKR's investments in PharMerica and Covenant Surgical come mainly from the Americas XII Fund, which closed with $13.9 billion in March. Preferred equity financing for the American Medical Response deal is provided by KKR mainly through its North America XI Fund, which closed in 2013 with $9 billion, and by Koch Industries Inc. subsidiary Koch Equity Development LLC.
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Meanwhile, the firm is raising its healthcare growth equity fund, KKR Health Care Strategic Growth Fund LP, the total commitments for which as of April was $598.6 million, according to a filing with the Securities and Exchange Commission. Third-party commitments accounted for $333.99 million, with parallel vehicles and the commitment of the general partner and its affiliates accounting for the rest, the April 11 filing showed.
Commenting on the deployment activity, Gerald O'Hara, a stock analyst at Jefferies LLC who covers KKR, said that generally speaking, KKR "has obviously been taking advantage of a strong capital raising environment having recently closed two drawdown funds (Americas XII and Asian III) as well as remaining in the market raising capital for more specialized funds."
Taking into account private equity and other funds, KKR has dry powder of $42.5 billion, a record for the firm, O'Hara said.
"KKR has highlighted healthcare, and infrastructure from a strategic sense as well as dislocated banks on the credit side," he said.
While the firm has been busy on the deployment side, O'Hara pointed out that with valuations being where they are, KKR is a net seller everywhere except perhaps in Asia.
"I think you're seeing a continued emphasis by them [KKR] in the healthcare market because of a couple of things," said Terry Roman, a partner at Snell & Wilmer LLP who advises corporate clients on healthcare deals, pointing to factors including a growing aging population throughout the world, and chronic health conditions and diseases becoming more common.
"They're [KKR] on a health kick because of the overall amount of global spend you see in that area," Roman said.
In the PharMerica deal, KKR linked up with a familiar face. It partnered with Walgreens on the acquisition, less than a year after selling its remaining shares in the drugstore chain. KKR acquired a stake in Walgreens through the latter's purchase of U.K. peer Alliance Boots GmbH, which was acquired by KKR and others in 2007.
The buyer for Louisville, Ky.-based PharMerica is a newly created KKR-controlled company in which Walgreens is a minority investor. The partnership with Walgreens brings strategic and financial benefits to the PharMerica transaction, Lin said.
Meanwhile, the American Medical Response deal marks Air Medical's third sizable acquisition under KKR's ownership, he noted. Air Medical has also done half a dozen smaller acquisitions since it was purchased by KKR in 2015 from Bain Capital LLC and Brockway Moran & Partners Inc. in a deal valued at about $2 billion.
The thesis for the American Medical Response deal is "bringing together what is one of the leading players on the air medical side with a leading player on the ground ambulance side to create an integrated medical transportation company," Lin said.
As for the purchase of Nashville, Tenn.-based Covenant Surgical, Lin noted that the ambulatory surgery center sector is one that KKR has followed for a long time. KKR previously invested in HCA Healthcare Inc. (HCA) , which owns ASCs in addition to hospitals.
The Covenant acquisition reunites KKR with former Harden Healthcare LLC CEO Lew Little, who joined Covenant as CEO in October of last year. KKR led a debt refinancing for Harden in 2010. Gentiva Health Services Inc. purchased Harden's home health, hospice and community care businesses in 2013. Senior Care Centers acquired Harden's long-term care unit in 2015.
Other transactions in the health realm this year include the $2.8 billion purchase of health information services company WebMD Health Corp. (WBMD) by KKR-backed online media and client services firm Internet Brands Inc. The deal, announced in July, was led by KKR's technology team within PE.
KKR has been busy with growth equity deals as well. In May, it teamed up with investment firm Aisling Capital to launch a medical device platform company called Ajax Health, which led a $45 million equity funding in Advanced Cardiac Therapeutics Inc., a developer of a catheter-based system for the treatment of atrial fibrillation and other cardiac arrhythmias.
The investment firm's other recent transactions include leading a $38 million Series B financing round in insomnia therapy device maker Ebb Therapeutics Inc. (formerly known as Cereve Inc.), and making a $60 million investment in pharmaceutical company Slayback Pharma LLC.