Sylvan Group puts US$140.5m in 4 local healthcare and pharmaceutical companies

[SINGAPORE] The Sylvan Group has invested US$140.5 million in 4 Singapore healthcare and pharmaceutical companies in the first 4 deals for its maiden fund, Sylvan Growth Asia Growth Fund I.

The fund is co-founded by Chung Kyung-sun, a grandson of Hyundai Motor founder Chung Ju-yung. Backers of the fund include members of the Hyundai and Rockefeller families, as well as UOB and South Korea’s Hanwha Life Insurance.

About US$200 million has been raised for its first fund among family and friends, with a target of US$400 million for the fund as it goes to market.

The private equity (PE) and buyout firm has bought majority stakes in Juniper Biologics, Juniper Therapeutics, Artemis Health Ventures and DX Imaging.

• Juniper Biologics researches, develops and commercialises novel therapies in oncology and rare diseases.

• Juniper Therapeutics offers specialised targeted treatments, with a 20-year licence to offer a novel gene therapy to reduce pain in treating knee osteoarthritis.

• Artemis Health Ventures works with the Singapore Orthopaedic Specialists, which consists of 10 specialists in orthopaedics in Singapore.

• DX Imaging is a radiology and imaging-services provider specialising in X-rays, ultrasounds and other scans that diagnose osteoporosis and fractures.

Chung Kyungsun, co-founder and managing partner of The Sylvan Group, said: "The 4 companies are typical of the 'double bottom-line' businesses we are attracted to. They are not only profitable, but are also making a difference in the way they improve healthcare through innovation, strategic partnerships and investments in technology."

Companies that the PE firm are looking for have to be profitable, the first bottomline. The second bottom line is environmental, social and governance, and impact investing (ESGI) standards. The PE firm is looking to work with its portfolio companies to create positive impact and create value to society.

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"We don't just invest into companies just because it is an investment opportunity, we always need to know their vision, mission and their value to society," said Chung.

The Sylvan Group is looking for mid-market companies with an enterprise value of between US$200 million to US$300 million, up to US$1 billion. Companies in the target size tend to be generational companies owned by families. The patriarch's shadow might still loom over such companies in Asia, but the second- and third-generation owners are now no longer focused only on maximising profits.

Instead, there is an openness to the idea of impact in that set of owners - something Chung has observed. The Sylvan Group looks to take majority stakes to help with the financial side of the business, while letting the original founders run the day-to-day business, making the sale more palatable for the family owners.

"Because of government regulations with more penalties for negative social and environmental impacts, now people actually see that being sustainable is actually more sustainable for the growth of the company," he said.

Leveraged buy outs (LBO) are common in Korea, but less so in South-east Asia. The debt instrument makes for better returns and the younger generation of owners may not be interested in carrying on the business, or would rather become employees than owners, said Chung.

Rising interest rates would have an impact on the LBO strategy, but Scott Jeun, co-founder and managing partner, said that they "would have to manage it very well".

The attractiveness of the first 4 portfolio companies revolve around targeting care for the ageing population, especially with musculoskeletal issues. The fragmentation of the Singapore healthcare system means that patients aren't efficiently treated.

Integrating the healthcare experience will lead to more accessible and affordable healthcare, said Chung. The same goes for investments into cancer treatments.

"I think for both, we are emphasising the accessibility and affordability of healthcare," he said.

The Sylvan Group is sector-agnostic, but has specific interests in areas such as healthcare, climate change and education. Climate change would involve reducing carbon emissions and clean technology.

"The vision and mission of the Sylvan fund is investing into large-enough companies that we can see substantial change in our society. There's going to be more efficient healthcare infrastructure, more efficient water treatment facilities because of us - that's something we want to see,' said Chung.

Read more:

• Hyundai scion turns to wealthy clans, leveraged buyouts for impact fund