Flexstone Partners, the private equity co-investment specialist investment house, has divested two of its US assets, providing significant gains for investors.

The sale of Foundation Partners Group (FPG), a funeral home business, delivered a 3x gross return on investment. Meanwhile, the sale of Velocity Clinical Research, which manages clinical trial sites, provided a 7x gross return.

Flexstone, an affiliate of Natixis Investment Managers, invested an initial $12 million in FPG in 2015, which increased to $13.6 million as FPG rolled out a fast-paced M&A strategy. The strategy also included a strengthening of the leadership team and the establishment of a dedicated M&A team to expand the business. FPG executed 51 add-on acquisitions in the period Flexstone was invested, taking its share of the funeral care market from 0.5% in 2015 to 2.5% in 2021.

The funeral business grows at a fairly low rate – about 2-3% a year in line with population growth – so you have to be very active with add-ons to improve value,” says Anatoli Gavrilov, Senior Vice President, Investments at Flexstone Partners.

FPG’s acquisition strategy particularly targeted the cremation sector, which was just 17% of the funerals market in 1990 but had grown to 46% at the time Flexstone invested in the company. Today, FPG has a higher exposure to the cremation market than all of its larger, public competitors.

The company’s footprint expanded from 22 individual locations to 151 across 21 US states by the time of Flexstone’s divestment. At the same time, revenues increased by 3.7x and EBITDA by 4x.

During Flexstone’s investment, the company significantly invested in management infrastructure and digital capabilities to drive organic growth and enhance M&A origination, execution, and integration. The company also started its Decedent Care Network to enhance services and drive operating efficiencies within clustered geographies.

More recently, Flexstone has done a second deal in the funeral care market. Flexstone invested in Funecap Groupe, France’s second-largest funeral care services company, early in 2021.

Flexstone’s divestment of Velocity, based in North Carolina, came after helping to grow the company from just three clinical trial sites to 17 sites in under three years. Velocity serves biopharmaceutical and contract research organisation (CRO) clients in conducting phase II and phase III clinical trials in support of their global drug development programs. In the last three years, Velocity has worked with over 200 biopharmaceutical clients, including all of the top 10 pharma sponsors, and its sites have collectively conducted over 5,000 clinical trials.

Flexstone invested an initial $5 million in late 2018, and added a further $3 million over the following 12 months. “The capital was used to support add-on acquisitions that further solidified the company’s leading position in its respective markets and pulmonary and respiratory therapies”, says Nicholas Elia, a New York-based Analyst at Flexstone.

Velocity’s pre-corporate EBITDA grew approximately six fold during Flexstone’s investment, led by organic growth and acquisitions.

Adding smaller research sites and geographical diversification enabled Velocity to win more trials conducted by pharmaceutical companies, through offering a wider footprint.

We felt that this sub-sector of the healthcare industry was not too crowded by large players, unlike some other healthcare services markets,” says Elia. “It presented an opportunity to build a leading player in the late phase clinical trials market.

For Further Reading:
Flexstone Partners
An affiliate of Natixis Investment Managers

Flexstone Partners, SAS – Paris
Investment management company regulated by the Autorité des Marchés Financiers. It is a simplified stock corporation under French law with a share capital of 1,000,000 euros Under n° GP-07000028 –Trade register n°494 738 750 (RCS Paris)
5/7, rue Monttessuy,
75007 Paris

Flexstone Partners, SàRL – Geneva
Independent (unregulated) asset manager, under Swiss Federal Act on Collective Investment Schemes (“CISA”), supervised by Commission de haute surveillance de la prévoyance professionnelle (“CHS PP” and regulated by the Swiss Financial Market Supervisory Authority (“FINMA”) under Anti Money Laundering requirements. It is a limited liability company with a share capital of 750 000 CHF.
Trade register n° CH-660-0180005-1
8 chemin de Blandonnet
Vernier 1214 Geneva

Flexstone Partners, LLC - New York
Delaware corporation, registered with the United States Securities and Exchange Commission as an investment adviser
28th floor of 745 Fifth Avenue, New York, NY 10151.

Flexstone Partners, PTE Ltd - Singapore
61 Robinson Road, #08-01A Robinson Centre
Singapore 068893

Natixis Investment Managers
RCS Paris 453 952 681
Share Capital: €178 251 690
43 avenue Pierre Mendès France
75013 Paris

This communication is for information only and is intended for investment service providers or other Professional Clients. The analyses and opinions referenced herein represent the subjective views of the author as referenced unless stated otherwise and are subject to change. There can be no assurance that developments will transpire as may be forecasted in this material.

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