April 20 2021
This episode is part of our Women in Healthcare Series. Our guest is Erin Lansky, a vice president with Blue Sea Capital. She assists with identifying, evaluating and executing investment opportunities as well as providing ongoing support to the firm’s portfolio companies.
Prior to joining Blue Sea, Erin was a vice president at RoundTable Healthcare Partners, a healthcare private equity firm. Prior to RoundTable, Erin was an investor with BDT Capital Partners and GTCR’s Healthcare team in Chicago. She began her career in the Mergers & Acquisitions Group at Bank of America Merrill Lynch in New York.
Morgan: Welcome to PointByPoint. This is Waller's Chief Business Development Officer and the host of the podcast, Morgan Ribeiro. On today's episode, we are continuing our Women in Healthcare series.
I am particularly excited about this conversation on the impact of women leading the way in healthcare private equity.
Joining me today is Erin Lansky from Blue Sea Capital, which is a private equity firm based in West Palm Beach, Florida. Erin, welcome to the show.
Erin: Thank you for having me.
Morgan: Absolutely. So to get started, please share with our audience a little bit about yourself. I know you grew up in a family that was in the healthcare industry and created your own path. Tell us about your career and how you have ultimately landed at Blue Sea Capital.
Erin: I was raised primarily by my dad, who is a healthcare executive, and both of his parents were physicians. I was always surrounded by healthcare. In high school, I actually interned with a general surgeon and yet was constantly fainting in the [operating room]. If it weren't for that small detail, everyone would've pinned me for the next doctor in the family. So fast forward – I went to Dartmouth and discovered economics, and it was really with the support of older Econ majors that I was encouraged to apply for winter, off-cycle investment banking internships in New York City.
Growing up in the South - very far from Wall Street – I just knew that [these internships] were competitive, highly analytical, challenging. And the kicker for me at the time was actually that there were not many women in Mergers and Acquisitions, in particular. So with that challenge in mind, I became a winter intern in Bank of America/Merrill Lynch's M & A group shortly after the global financial crisis.
And in short, when I was there, I loved the pace, loved what I was learning, loved the steep learning curve, the mentorship I was getting, and I actually spent several internships and then two years following graduation as an Analyst on the team. We were generalists across the economy, but I found myself gravitating toward healthcare transactions.
And at the time, there were a lot of Big Pharma companies acquiring fast-growing biotech. There were several medical device deals and consolidation in quick succession. And a personal highlight for me as a Spanish and Portuguese double major: a big acquisition at the time was UnitedHealth Group's acquisition of Brazil's Amil Participações business.
I saw a lot of my mentors moving from investment banking advisory roles to private equity and hedge fund investor roles. And that really excited me, in terms of the opportunity to not just facilitate deals, but really learn how to make investment decisions and partner with companies operationally for the long-term.
So back in 2014, I moved to Chicago to do just that. I was a Healthcare Associate at the large-cap private equity firm, GTCR, and since then, I really haven't looked back. I've spent the last seven-plus years in healthcare private equity in Chicago partnering with owner/founder-, family-led businesses at BDT Capital Partners, and then focusing exclusively on healthcare partnerships at Roundtable Healthcare Partners.
And then last year, in the depths of COVID, while many private equity firms were focused internally on shoring up the financial position of their existing portfolios, Blue Sea Capital was hot on the fundraising trail with a lot of momentum raising its second fund through COVID. When the opportunity arose for me to join the team and really lead our healthcare product investments in medical devices, life sciences, niche products, and diagnostics, I jumped at the chance.
So that's really how I got from growing up in New Orleans with a healthcare family background and now investing in healthcare in South Florida.
Morgan: And it's certainly an exciting time to be in the PE field and especially investing in healthcare right now. You mentioned your particular emphasis on the healthcare product line of Blue Sea Capital is focused on partnering with special growth-oriented, lower-middle market companies in the healthcare and industrial growth sectors. Can you tell us more about the firm and what makes your approach unique?
Erin: Yeah, absolutely. To answer that I'd say most firms would usually start with the "what." And concretely, we're a private equity fund based in West Palm Beach, Florida. We have $760 million in assets under management. And, as I mentioned, we're investing out of our second fund with $430 million of total commitments. We invest in growth-oriented, lower-middle market businesses as small as $3 million of EBITDA, up to $20 million, with transaction values up to $250 million.
For us, what really matters is less about the "what." Where we really start our conversations with entrepreneurial management teams and potential investment partners is the "who."
And for me, I've had the privilege of working at several, highly respected leaders in private equity. I can say from experience that the integrity of our team – its alignment with my personal values, how I want to conduct business – is truly unique. And that's really why I joined Blue Sea and certainly appeals to many of our partners.
At the outset, we're mission-driven, we're true partners to entrepreneurs and their special businesses. We really take a servant leadership approach and support the transformation of good businesses into great businesses. So different from a turnaround or a deep value approach.
What we like to say is we bring large company resources, experience and capabilities, but with a small company focus and style. And we're typically the first institutional partner that an owner chooses for their business. And we take that stewardship incredibly seriously. So we do what we'll say we'll do. We put management first. We're good partners in good times. And even more importantly, great partners in tough times.
The results of this approach really speak for themselves. As Blue Sea and the principles of our firm, we've never lost money on our investments. Neither have our lending partners – never had an impairment of our capital. Our gross returns are greater than four times multiple of money 40% IRR, or implied annual return.
Individual deal returns have ranged from 2.2x to greater than eight-and-a-half times our money. So, in itself, that track record is pretty special in our industry and personally really speaks to how we do business.
Morgan: I would think as someone working at the firm, that says a lot about not only how they work with the investment partners, but also just as an employee there.
And as you were looking to make a switch, I think that says a lot about how you, as an individual, are treated and how they invest in you and your career and your responsibility, then that's the type of organization that you want to be with. And I think that speaks volumes about the firm and its reputation as well.
Just as we continue to talk about the emphasis for Blue Sea, what about your role and how do you work with the firm's portfolio companies, and where else do you concentrate your time?
Erin: Yeah. So as a Vice President on the Healthcare team, I spend all of my time focused on sourcing, evaluating and executing healthcare transactions, as well as working with certain of our existing investments.
I really spend time across the investment continuum, as they say, from looking at very early-stage, potential partnerships to evaluating whether they are a good fit for us to ultimately continuing to partner with the business after we invest.
Currently I serve as a board member for Apex Physics Partners. As an example, Apex provides outsourced radiation safety inspection and calibration services to large hospitals, imaging centers, and physician offices throughout the U.S. And with that deal, we employ almost 100 medical physicists and continue to pursue new partnerships in new and existing geographies. And I spend a lot of my time working with Apex on strategic investment in the business' technology. Our resourcing platform is to really empower physicists to spend their time “being physicists.” And we take care of the operations in the background. In addition to spending a lot of time attracting and recruiting new physicist partners via M&A.
Morgan: What areas are you targeting in healthcare services at the moment? What's hot in healthcare investing. And beyond that, what attributes are you looking to see in the companies you're investing in?
Erin: In addition to outsourced services, such as Apex , where we do see continuing outsourcing trends coming out of hospitals, large IDN and their GPO partners, I cover behavioral health within healthcare services.
We continue to spend a lot of time evaluating opportunities in home and community settings, as well as outpatient solutions for pediatric adolescents and adults. And in particular, we're hyper-focused on behavioral players with a holistic and differentiated approach.
For us, how we assess that is really via their internal approach to outcomes measurement. And outcomes are everything for us. We won't invest in a behavioral business that isn't outcomes-driven, which may sound obvious, but in behavioral, many players, for example, have been historically very slow to measure anything about their patients. Whether because historically large payers didn't require it or because they weren't confident in what to measure or even what efficacy their interventions might show. So it's effectively a back-to-the-basics approach. We want to see that mission-driven bend that we take toward our investments is supported by sound data, where the interventions are truly effective, and they're measuring that day-to-day.
Morgan: Behavioral health is such a hot area right now, and I think obviously with the pandemic, this is becoming even more so important for a variety of different reasons. Switching gears here just a bit and related to the emphasis of the topic of this podcast series, women are underrepresented in private equity firms and a recent study I was reading found that fewer than 10% of senior roles at private equity firms are held by women worldwide. What's your perspective on this? And how did you break the proverbial glass ceiling and how does a primarily male environment influence the work that you do?
Erin: Yeah, in short, my perspective and professional experiences have been very consistent with that stat.
I have often been the only woman on the investment team – or in several cases – at the entire firm. Or in the room when we meet with management teams or discuss and evaluate potential investments. So it's really just a reality of the industry as it stands and the path I've chosen.
More specifically, the vast majority of this 10% of women in senior roles that you referenced are actually not in investment roles, but rather administrative HR, fundraising, investor relations or finance.
And I feel I'm certainly still very much on the path to breaking the proverbial glass ceiling but do feel incredibly confident in the culture, the values, the collective aspirations of our team at Blue Sea Capital to support all of our individual and collective professional pursuits, particularly on the investment team, regardless of any of our gender identity or sex.
Morgan: What advice do you have for women who might be considering a path in private equity or healthcare, or really any male-dominated sector? I know, I'm at a law firm and legal is certainly a sector that faces many of these same challenges.
Erin: I thought about this question a lot and from a number of angles, and I spend a lot of my time mentoring and encouraging women and all individuals considering private equity or healthcare.
I believe strongly it is so important to find a team that is openly and consistently supportive of you and your career goals and around whom you feel comfortable being yourself every single day. Ideally, I wouldn't be the only female investment professional at my firm, but I am, so it is absolutely essential that I feel supported and encouraged to share my unique perspectives on investments every single day.
And I feel extremely grateful to have found a team like this. It was certainly not by happenstance. It is not the norm, unfortunately. And it was a big part of my diligence process and where I wanted to hitch my proverbial cart for the next several fund cycles. It's important to not just like the people you work with, which is certainly a common adage, but really to know that they support me every single day.
Morgan: Absolutely. I'm going to throw another stat your way because of course, for any investor, the bottom line is key. And I wonder how gender diversity affects that.
There are a number of studies that suggest that it absolutely does. The Peterson Institute - in just one example - found that a move from zero women leaders within a corporation to 30% representation was associated with a 15% jump in profits. Is this starting to resonate at all?
Erin: Private equity firms are certainly paying attention to their own employee demographics for the first time. And there are more non-white, non-male associates joining firms at the entry-level than ever before. That said, we statistically lag as an industry to other sectors of the economy.
And we certainly have a long way to go, particularly in cementing that correlation between our own team's compositions and our investment decisions. Whether private equity leaders are recruiting talent to benefit investment decisions or enhance returns versus because our limited partners are demanding as much is unclear to me. There have certainly been a number of ESG, or environmental, social, and governance requirements, impressed upon and emphasized for private equity firms by our ultimate institutional investors. Whether that versus a true recognition of diversity benefiting our returns, I'd say the jury is still out on that one.
Morgan: Mentorship is so important whether or not those are formal or informal mentorships, do you have anyone either specifically, or just vaguely, you want to shout out to anyone who have supported you or given you particular words of advice and really guided your career journey.
Erin: There are so many, and I feel lucky to have been supported and encouraged throughout my career. Even way back when, during my academic studies, one of my few female Economics professors, Marjorie Rose, who's still a macroeconomics professor at Dartmouth, asked me to be a TA, and that certainly provided an early confidence boost in my capabilities in what was at the time a very new academic area of study for me.
So I've certainly received countless pieces of feedback and coaching along the way, but what really seems most meaningful looking back are the opportunities I was given, and that I really capitalized on early in my career.
At BofA Merrill Lynch, a couple of managing directors at the time, James Lindsey and Sravan Emany, in the M&A group, provided many opportunities for me to work with clients in a capacity above that of an analyst. Whether it was a large media and telecom business in New York City, or whether it was a multinational pharmaceutical business based in Germany – having those opportunities and taking advantage of them was key to building my confidence.
Similar situation at BDT Capital: very soon after being promoted to Vice President within our general partnership, there were a couple of founding and senior members of that team – Chip Dunn and Rob Verigan in Chicago – who went out of their way to provide leadership opportunities for me in specifically pretty high-stakes board meetings with closely held family businesses, and just ample chances to participate in and lead board discussions at a pretty early point in my career.
To your question of male or female, I wish I could point to more female mentors along the way, but by nature of our demographics that we've talked about, there are frankly very few.
And I think regardless, any mentor who's allowing you those opportunities, whether or not they're the big, obvious ones, [like] an opportunity for a promotion or really encouraging you to go after a position. But it's also just the seemingly smaller things, and opportunity to speak up at a meeting or to present more frequently. I think all of those things matter over the course of your career.
Morgan: I also wonder if you ever think about that other layer beyond the PE environment, right? There's also an imbalance within the healthcare industry in terms of leadership of healthcare companies and healthcare organizations, women make the vast majority of healthcare decisions and are represented in the majority of the nation's healthcare workforce.
And yet most executives and healthcare organizations are men. And as an investor, do you think this dynamic affects how healthcare organizations operate and does diversity affect outcomes?
Erin: I think that it's a great question. And having been the only woman at the table at times – certainly this lack of operators and leaders on the healthcare side of the table has been obvious.
I think having a woman at the table, ideally on both sides of the proverbial table, certainly affects investment decisions, particularly in healthcare. I strongly believe that diversity of perspectives, backgrounds, and ideas at the highest level not just gender, but through a number of lenses, improves outcomes.
So, as an example, within consumer healthcare, which is an area where I've spent a lot of time over the last several years, having a woman on the investment team may lead to faster, more accurate decision-making in evaluating opportunities within skincare, aesthetics and other categories with a traditionally female customer basis.
So not having a woman at the table can definitely lead to faulty conclusions by the men who might be making a quick judgment or evaluation from their perspective, having not tried the products themselves. And I've certainly witnessed that as well: coming to maybe the wrong answer because of a lack of diversity at the table.
Morgan: Absolutely. Which, of course, then goes back to that does impact the bottom line if we're making assumptions or not really having the end-user involved in this conversations earlier on. So as we come to a close, first, I want to thank you for your time and to end with just one final question.
And that is what concept, opportunity, technology or evolving industry trend gives you the most hope for the future?
Erin: I think that a monumental silver lining coming out of a global pandemic, if there is one, is really COVID-19 further accelerating the de-stigmatization of mental health.
Unfortunately, that is because so many of us – our families, frontline workers, the elderly – are impacted both physically and mentally, and the parity of healthcare benefits provided by payers during this time, the societal recognition of mental health in parity, so to speak, with physical health is incredibly powerful and certainly gives me hope.
And the way I've seen this from my seat as an investor is that it has certainly motivated and forced healthcare companies to continue to focus on truly effective, outcomes-driven and community-based solutions for mental health. More than ever, we see the "meeting people where they are approach," the human approach – real solutions, not just band-aids or temporary fixes – as coming to the forefront.
And I believe that collective recognition scrutiny and openness is only beneficial for society with so many having suffered in the shadows for decades. So unfortunate it had to come out of this collective suffering, but I certainly see many opportunities for effective mental health treatments and solutions whether delivered in person or via telehealth to be very promising and certainly an area where I spend a lot of time and get excited.
Morgan: I absolutely agree. I think, for all of the downsides of COVID and so many have been adversely affected by it. I think that there's also so many learning lessons and silver linings in all of this, and particularly in healthcare and behavioral health.
We've been forced to evolve rather quickly when you mentioned tele-health and I think that's been out there and folks have been trying to push for access to care through telehealth for so long. And then we were just forced to do it. And so I'm hopeful that some of the things that came about as a result of the pandemic are here to stay.
Morgan: Erin, I've enjoyed our time together. Again, I appreciate your time.
Erin: Thank you. Thank you so much again for having me. I've really enjoyed the conversation, and these are certainly very complex and great questions that affect not just us as investors and healthcare organizations but really citizens more broadly.