The intersection of healthcare and information technology is of rising interest to private equity firms, including KKR. Earlier in April, KKR announced the acquisition of SunFire, a developer of software and services for the Medicare market, from Stone Point Capital, which retained a significant minority stake.
Founded in 2016, the Carlisle, Massachusetts-based company “combines quality data and smart tools to help brokers, carriers, and providers work more efficiently and effectively,” according to the company’s home page.
KKR made the acquisition through its $4 billion Health Care Strategic Growth (HCSG) Fund II, which closed in January 2022. To find out more, PE Hub reached out to Ali Satvat, partner and head of healthcare strategic growth at KKR, who answered some questions.
What interested KKR in SunFire?
One of the main differentiators at SunFire is the leadership team. The team at SunFire consists of experienced industry veterans who have a successful track record of value creation in the space. For example, most recently prior to SunFire, David Graf, CEO, and Kevin Waldman, CFO, had a productive tenure leading Tranzact, a leading telesales organization focused on the insurance market, through significant growth periods and multiple successful transactions. The entire leadership team at SunFire is deeply committed to, and passionate about, the growth of the business, and they have been able to differentiate themselves by delivering on a range of high-quality offerings with a variety of customers.
Another aspect that interested us in the business was its market position – SunFire has grown into an industry leader and has been able to capitalize on opportunities to scale. SunFire’s market-leading positioning at the point of enrollment gives the company differentiated access to members to activate benefits and cross-sell additional solutions.
The team has already achieved significant growth over time, and we look forward to expanding on what they have built thus far.
What makes SunFire stand out in the market?
One characteristic that sticks out is the team’s customer-centric approach. It is clear that Dave, Kevin and their team have constructed each of the company’s processes to consider the customer first, particularly in the approach to product development and go-to-market strategy, which is unique in the market. Customers continue to respond well to this approach, as evidenced by SunFire’s leading customer satisfaction levels.
What is KKR’s investment thesis for this deal?
SunFire sits at the intersection of themes that KKR has spent extensive time evaluating across the healthcare team, specifically at the intersection of healthcare and information technology. We see strong secular tailwinds behind these themes and, combined with the company’s strong customer base and tenured executive team, believe that SunFire is well-positioned to benefit from them.
What are the growth opportunities KKR sees with this investment?
KKR’s investment in SunFire will allow the company to continue developing existing and new products, expanding into new markets, and enhancing internal operations. Specifically, we see meaningful opportunity to drive further engagement with customers and members following initial plan enrollment.
While SunFire already maintains a strong blue-chip customer base, we believe that there continues to be an opportunity to expand these relationships, particularly with leading health insurance carriers.
How does SunFire fit into KKR’s portfolio?
KKR has a long track record of supporting healthcare companies globally, having invested more than $20 billion of equity capital in the sector since 2004. The major benefits of KKR as a partner include the combination of our deep sector focus, global network of resources, and ability to collaborate across sectors and strategies to create opportunities around specific investment themes.
For example, we had a great outcome with our investment in Internet Brands, which is an example of how our teams across industry sectors (in this case healthcare and technology) were able to come together to collaborate effectively and create significant value. Another example is our investment in Therapy Brands, during which we benefited from collaboration across our healthcare and technology teams.
Additionally, as it relates to this transaction, it is worth mentioning that we have worked with Stone Point Capital in the past, including on our successful investments in Mitchell International and Sedgwick Claims Management Services. This institutional connectivity and past experience in similar end markets further bolstered our conviction around SunFire.
