Farmafactoring S.p.A. is the leading provider of credit
management services to suppliers to the Italian public healthcare
system, the Servizio Sanitario Nazionale ('SSN'). The company was
founded in 1985 by a group of Italian and multinational
pharmaceutical and biomedical companies to alleviate the cash-flow
difficulties of the SSN's suppliers, who were affected by the
traditionally long payment cycles of its constituent health
authorities.
Farmafactoring purchases and manages the collection of its
clients' receivables, allowing them to completely outsource their
accounts receivables management function. In addition to providing
non-recourse factoring, Farmafactoring also provides receivables
management services for clients who choose to retain them on their
own balance sheets.
Farmafactoring's strong relationships with the SSN's local
health authorities across Italy and deep knowledge of their payment
patterns allows the company to price its products very
competitively, while its scale gives it a strong bargaining
position when negotiating payments from the health authorities.
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The deal
The company was attractive to Apax Funds as it is the clear market
leader with a defensible competitive position in a growing sector.
Historically, growth in public healthcare expenditure has not been
impacted by the economic cycle and, in addition, the company has
identified several growth opportunities, including providing its
services to a wider range of suppliers to the SSN and to other
parts of the Italian public sector, launching new products to its
existing clients, and expanding internationally.
Why Apax Partners?
In December 2006, the Apax Europe VI fund won an auction to acquire
a 91.7% stake in Farmafactoring. The Apax deal team had been
developing an understanding of Farmafactoring's business and
prospects for some time prior to the decision by the company's
shareholders to begin the sale process, and their extensive
knowledge of the business provided a key competitive advantage
during the auction process.
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What about the future?
Since the acquisition, the business has continued to perform
strongly and the Apax deal team has advised the company's
management to put in place preemptive measures to counter any
shocks resulting from the volatility of the credit markets.
In addition, a series of initiatives has been launched to
optimise the key value drivers of the business, including targets
to encourage the collection of as much default interest as possible
from the existing book of business, buying portfolios of
receivables outside the existing client base and improvements to
the funding structure of the business.
Finally, the company has completed the necessary groundwork to
expand its operations to Spain to leverage its expertise with
public healthcare payers in a market with similar dynamics to
Italy.