Havencrest Capital Management, a Dallas-based private equity investment firm, is looking to establish partnerships with lower market healthcare firms due to the tremendous opportunity the firm sees in this space.
The firm launched four years ago under the leadership of Chris Kersey, a doctor with an MBA, who decided that his chosen career path was not in the doctor’s office, but the finance office. Prior to launching Havencrest, Kersey served as the managing member and partner of Baltimore-based Camden Partners Holdings.
“I obviously love healthcare but I just decided that I wasn't going to pursue a pure clinician route but that I wanted to be on the business side of healthcare,” he said.”
Kersey, who serves as the founding managing partner of Havencrest, launched the firm to partner with lower market healthcare firms and bring them to the next level. After identifying targets. Havencrest infuses its partners with a capital investment of $25 million to $75 million. It then installs two to three officials in high-ranking positions while keeping the founder on as a member of the board.
The founder of the partnered firm still maintains a valuable presence by serving as a prominent member of the board. While the odds of a company reverting back to the original ownership is minimal, Kersey said the knowledge and experience the founder brings in invaluable and Havencrest wants to maintain that relationship for as long as possible.
Havencrest develops a three– to five-year strategic growth plan for firms, according to Kersey. The plan is to grow the firm’s assets from a lower market into a middle market enterprise. At the conclusion of the plan, Havencrest will then either infuse the firm with more capital, sell the company outright, take it public, or dispatch it through another public offering, according to Kersey.
“Our mantra is to do well by doing good,” Kersey said. “We can create very unique platforms that addresses some of the … problems in American healthcare by doing good but we can also do well at the same time for our investors and that is a real blessing.”
The firm has been successful in its push to raise capital as it has more than $650 million in assets under management. Thus far it has closed two separate funds, with the most recent of which closing in April with $356 million, which is higher than its $300 million target.
When seeking partners, Havencrest looks for ideal candidates and not waiting for them to come to the firm, Kersey said.
“We are really focused on not just passively responding to opportunities as they come across our plate but instead very proactively and very strategically looking at certain themes of American healthcare that have a lot of tailwinds,” he said.
Havencrest is particularly focused on value-based care and adolescent behavioral health. The former is a unique approach to healthcare where medical providers such as hospitals and physicians are paid for their results and not the number of patients they see. There is also more of a team approach to solving the problem. This vision for healthcare is essential for the future, according to Kersey.
“[The current system] is a volume-based reimbursement paradigm where the more things you do the more you get paid,” he said. “The antithesis or the anecdote really of fee for service is value-based care where the payers and the providers and sometimes the patients too are all aligned to deliver equal or better-quality care for equal or reduced price so you can start to bend that cost curve that is becoming very problematic in our American economy.”
As for behavioral health, it has become a more important aspect of the healthcare industry in the wake of the Covid-19 pandemic, in particular when it comes to children, Kersey said. However, one silver lining is that because mental health has become much more of an issue, people are more willing to discuss and address it.
“It is not taboo to talk about mental health anymore and it has become part of our American lexicon,” Kersey said. “It is a major opportunity to not only invest in that area but to change healthcare for the better and improve Americans’ mental health challenges because they are severe.”
Kersey has a diversified background that he brings to the expertise at Havencrest, having earned his doctor of medicine (M.D.) degree from the Emory University School of Medicine and his M.B.A. from Harvard Business School.
Along with his work at Camden Partners, Kersey also served as the chairman of Johns Hopkins Medicine International from 2011 to 2017. He was also elected to the board of trustees of the GuideStone Funds in 2017. It is the largest Christian mutual fund in the world, which has more than $12 billion in assets under management.
When seeking the right founders to work with, Kersey said he is looking for someone who has created a great firm, but may not have the expertise or resources to grow it any further. He said that one of the pitches he makes to founders is that he is helping them establish their legacy by growing their firm into something special.
“I literally call it a chance at immortality and that means they want a legacy,” Kersey said. “They also know that they will need additional and supplemental operating knowledge to take their company to the big stage and that's where our partners have something that adds specific value.”
While healthcare continues to be a growing industry, the economy itself has been struggling as of late. That means that establishing a partnership might be more difficult in current times. The economy may cause some founders to be more selective in who they partner with, in the end it comes down to what Havencrest can provide for these firms and that personal relationship or connection the firm makes with the founders and their company, according to Kersey.
