Baird Private Equity, utilizing funds from its venture and later-stage funds, joined up with JVC Management to purchase COMPASS Services, a supplier of intravenous admixture services for hospitals and the pharmacies market.
The purchase price and all related information were undisclosed, but it is known the deal was equity financed, save for a working capital investment made by Cole Taylor Bank, a Chicago-based institution, which will be used to purchase receivable and additional inventory.
Baird houses two funds in the private equity sector: Baird Capital Partners, a $300 million fund focusing on later-stage investments and Baird Venture Partners, a $100 million fund used for angel investing and startup investments.
“This is a first time for us, with the funds doing a joint deal, but there is an early growth stage element to this target, and since we are treating this purchase as a platform, we were led to this decision,” said Gordon Pan, a partner with Baird. Although COMPASS was acquired through the Baird platform company Pharmedium Healthcare, Pan said the firm’s latest purchase will not fall under the auspices of Pharmedium, instead initiating a separate platform, to sit side-by-side with Pharmedium.
Additional equity investments came from Chicago-based JVC and David Jonas, the COMPASS CEO and a principal with JVC. “Jonas is unique in this business,” said Pan. “He has big-company experience with an entrepreneurial background, and he’s the right person to head up COMPASS.” With Jonas’ focus on cost controls, Pan said Baird plans to keep the COMPASS management team intact.
“There aren’t many competitors in this market, and significant barriers to entry exist stemming from the complexities of forming relationships with hospitals,” said Pan. “Baxter originally developed this business to provide a service to their customers, but they’re more product focused, so it’s only logical for them to pull out.”
Although an auction never materialized, COMPASS was shopped around prior to the Baird purchase. “[The sale] took a long time, from beginning to end,” explained Pan. “Negotiating with Baxter is never easy.” Baxter hired Taylor Co., a D.C.-based deal broker, to search for potential buyers, and the seller’s original intention was to pair COMPASS with another Baxter carve-out, a maker and seller of pre-filled syringes, but Baird’s interest only included the COMPASS assets.
Pan said the plan for COMPASS is to focus internally and on organic growth for the first six months, and possibly introduce new products. In terms of add-on growth, “there will be no active moves for at least six months. We have more than 700 customers, so there’s opportunity for significant [internal] growth right there,” he said. He also mentioned COMPASS has shown compounded annual growth of 30% for the past five years, and the is to be goal north of $100 million in revenue.”
COMPASS’ product, known as intravenous admixture services, involves the mixing of prescribed drugs with a base IV solution know as intravenous compounding used in IV therapy. Its services focus on total parental nutrition, IV antibiotics, narcotics mixtures for pain management, cardioplegia solutions and continuous renal replacement therapy.