In a competitive US healthcare deal market, Accelmed's strategy puts it "below the radar of the big guns," managing partner Uri Geiger told Buyouts.

Israel-born Accelmed Partners secured $400 million in the close of a second buyout offering, confirming its 2015 decision to launch a US-focused healthtech strategy.

Accelmed Fund II, unveiled in late 2019, wrapped up this month at its hard cap, 33 percent above an original target of $300 million, founder and managing partner Uri Geiger told Buyouts. Fund II is more than 3x the size of its predecessor, closed in 2016 at $130 million.

Fund II received commitments from new and existing institutional and family-office investors in North America, Europe and Israel. As Geiger had met limited partners prior to the outbreak of covid-19, the fallout did not pose significant barriers to fundraising, he said.

Accelmed, founded in 2009 as a venture capital firm, six years ago designed a healthtech private equity strategy led from the firm’s office in Aventura, Florida.

The strategy involves making control investments in US lower mid-market businesses in medical devices, diagnostics, digital health and tech-enabled healthcare services sectors. Target opportunities generally have revenue of $20 million to $70 million. Accelmed also makes non-control growth investments in companies with revenue of $10 million-plus.

A key aspect of Accelmed’s investment thesis is “the intersection of technology and healthcare,” Geiger said. “We’re not a traditional healthcare buyout fund that invests in things like pharma and services. We’re a health technology fund.”

In a competitive US healthcare deal market, this approach puts Accelmed “below the radar of the big guns,” Geiger said. “We operate in a playing field without much competition.”

Accelmed’s VC background enables an understanding of tech trends that is important to the PE strategy, Geiger said. In addition, as part of its operational tool kit, the firm taps into its “roots in Israel,” he said, to source innovation that can be used to develop and transform US healthtech companies.

Small fund, top performer

Accelmed’s thesis emerged from pre-2015 investing by Geiger and Israeli billionaire Mori Arkin through Arkin Holdings, a family office. Raising Fund I, however, proved challenging as LPs did not understand the “non-traditional strategy,” Geiger said. The result was a small inaugural fund that relied heavily on co-investors to capitalize transactions.

Accelmed Fund I is nonetheless a top-quartile performer in its vintage, according to PitchBook data. As of September 2020, the vehicle was generating a net internal rate of return of 26.4 percent.

Contributing to this track record was Accelmed’s 2018 sale of Cogentix Medical, a urology-focused medical device maker, to Patricia Industries-backed Laborie. The purchase price was $240 million.

Fund II’s bigger pool will allow Accelmed to write larger checks, typically $10 million to $50 million per deal, and invest in more companies, Geiger said. Of an expected eight to 12 platform investments, it has already made two, including TearLab, an ocular surface diagnostics provider.

The listed TearLab was taken private in mid-2020, with Accelmed agreeing to invest $25 million beyond the consideration. It was then “over-leveraged,” Geiger said, but is now “almost debt free and back in growth mode.” The plan is to expand TearLab’s commercial base and team, add new products and pursue add-on acquisitions.

Accelmed also last year led a $67 million growth financing of NeuroPace, a maker of medical devices for treating neurological disorders. Among the other investors were KCK Group, OrbiMed, Revelation Partners and Soleus Capital.

Geiger, once a major in the Israeli air force, worked for much of his career as a healthcare executive. He is also a founding partner of Dragon Variation Fund, one of Israel’s first hedge funds.

Geiger leads an Accelmed investment team that includes general partners Evan Norton, Lior Shav and Rafael Torgovicky.

Published by Buyout Insider - on March 16, 2021