Spotlight: Seeking Life Sciences/Healthcare Leaders in the PE Space
June 5, 2023 – With a focus on helping PE and VC backed healthcare organizations, Tim Russell, managing partner of The Tolan Group, oversees the business development and recruitment activities for private equity and venture capital clients. Mr. Russell recently shared his views on the current state of recruiting for PE outfits in the life sciences / healthcare sector with Hunt Scanlon Media.
Tim, what types of companies within the life sciences/ healthcare sector are PE outfits looking to invest in?
The area of healthcare services remains an active sector for investors. PE firm clients have kept us busy looking for C-suite execs and VPs for multi-site, multi-state MSOs in various specialties. We have helped PE-backed portfolio companies find executives in specialties such as: Ophthalmology, cardiology, rehab, gastroenterology, plastic surgery, fertility/women’s health and many more. Behavioral health, home health and hospice all remain very active investment sectors as well.
Within these types of companies which positions have kept Tolan Group busy?
The role of CFO is by far the most requested role we are asked to help our PE clients find for their portfolio companies. A close second is the role of CEO. Both of these positions have seen significant changes in the job requirements and characteristics of the ideal candidate. We are also seeing a fair amount of VP level searches in areas of finance and operations in particular.
After placing executive leaders, how does your team help the leadership team build out the next layer of management?
Our recruitment approach involves understanding the complete hiring plan even before initiating the first search. We want to understand what will be needed in both senior and mid-level management roles even if the organization isn’t ready to initiate a search immediately for those positions. Knowing what the comprehensive hiring plans are, helps us keep our eyes and ears open as we procure talent for the search we are conducting. It’s not uncommon for us to encounter a husband and wife team or candidates with colleagues that they can bring with them to a new assignment.
Can you explain how you maintain relationships with candidates and clients?
Our firm has developed a refined “account management sequence” that is a predetermined set of activities designed to keep in touch with both clients and newly hired candidates. At certain time milestones, we reach out to maintain rapport and inquire about any upcoming changes at the organization that we might assist with. Certain steps in the sequence involve check-in phone calls, email correspondence, in person meetings and zoom calls involving planning sessions and brainstorming around the subject of talent management and future hiring. Our job isn’t over just because the placement has been made. We want to be seen as an ongoing partner for any future endeavors at the organization.
What is your outlook on the PE sector for the remainder of 2023 and beyond?
Healthcare will remain a very active investment sector. We are seeing MSOs grow exponentially as more and more specialties are being found to be conducive to a PE MSO model. In the early stages of PE healthcare investment, certain specialties were thought to be a better option for management service organization contracts than others. Now that the evidence exists that the model can be successful in various specialties, the investment in PPOs will remain steady for the balance of 2023 and beyond. When considering executive talent, PE firms are beginning to understand the need of talent upgrades in different stages of the holding period. As an example, the CFO of a current $10 million portfolio company may be instrumental in steering the organization to $40 million, but beyond that, they might struggle to scale to the $100M mark. Given nuances of salary expectations and career successes, PE investors will continue to grapple with the dynamic of having to upgrade senior leaders during the holding period rather than having the C-suite executive that will be in the seat at deal inception and ride the investment from beginning to exit. This is a dynamic that we feel will remain constant in 2023 and throughout the foreseeable future.
What have you seen in as far as what PE outfits are looking to spend dry powder on? Does life sciences/healthcare fall into this category and if so why?
Though the areas of Life Sciences and healthcare are two very broad categories, there is significant investment interest in both sectors. Tech enabled reporting within life sciences companies is appealing. As data continues to lead the success of big pharma and population health, investors remain bullish on tech companies that serve the Life Sciences ecosystem. Clinical trial reporting and case study outcome analytics technology is of particular interest. The dollars are in the data, so tech enabled platforms that can record and easily disseminate information are high demand plays for investors. In healthcare, there is robust interest in behavioral health, hospice and home-based treatments. Sadly, the need for mental health services shows no sign of slowing down. With opioid addiction treatment being needed in all areas of the country and the increased rate of youth depression, behavioral health services are needed at all levels. Hospice and memory care are also active investment areas. Seniors are living longer these days compared to previous years, so health services and treatment regimens for this fragile group of society will continue to be needed in large numbers. Opportunities abound for investors to invest in companies that enable patients and clinical care teams to compile information about treatment and health management remotely.
