Friedman Capital and Seal Rock Partners have acquired KeySource Medical, a wholesale distributor of generic pharmaceuticals.
Albert Paonessa, the former president of generic drug distributor Anda, and Stephanie Ring, the former co-founder and CEO of KeySource, participated in the transaction alongside Friedman Capital and Seal Rock. Ms. Ring will continue as a major shareholder and board member of the company. KeySource Medical was founded in 1996 and is headquartered in Cincinnati. The company is led by CEO Todd Szewc (www.keysourcemedical.com).
Friedman Capital makes control and growth capital investments in companies with EBITDA of $10 million to $50 million that are in the distribution and healthcare services industries. Capital for its investment activities comes from the Friedman family. The firm is led by its managing partner Randolph Friedman. Friedman Capital was founded in 2011 and is headquartered in Washington, DC (www.friedmancap.com).
In 1988, Mr. Friedman and Jay Levine, an executive partner of Friedman Capital, co-founded The Harvard Drug Group which they grew from $3 million to $500 million in annual sales. In December 2006, H.I.G. Capital acquired a majority equity interest in Harvard Drug with Mr. Friedman continuing as Chairman and CEO. In April 2010, Court Square Capital Partners acquired the company from H.I.G. At the time of the sale, Harvard Drug was the largest independently owned generic drug distributor in the US. Just a few years later, the company was purchased by Cardinal Health for $1.25 billion.
According to Friedman Capital, the buy of KeySource comes at a time when the generic drug distribution business is being consolidated resulting in reduced service levels to independent pharmacies. These pharmacies still represent nearly an $89 billion health care marketplace and dispense nearly 40 percent of all retail prescriptions.
“KeySource offers an ideal platform to re-establish the hallmarks of the industry,” said Mr. Friedman. “For manufacturers, these hallmarks include market access and price stability. Independent pharmacies and regional chains need an understanding partner willing to meet pricing, product and service demands. Our door is wide open for further acquisitions of like-minded distributors as both manufacturers and independent pharmacies seek alternatives to the current oligopoly that has little interest in their welfare.”
Seal Rock Partners was founded in 2015 by Jonathan Cohen and Bill Fradin. Capital for its investment activities, the firm invests from $10 million to $30 million of equity in lower middle market businesses, comes from the Cohen family. The investment in KeySource Medical is the firm’s first. Seal Rock Partners is based in New York (www.sealrockpartners.com).
© 2016 Private Equity Professional • 6-22-16