In March, the INVL Baltic Sea Growth Fund (INVL) exited InMedica Group – Lithuania’s largest private healthcare network – to Mehiläinen, an international digital healthcare company with Finnish origins. InMedica represented two milestones for the closed-end private equity fund, which launched in 2019 with €165m: it was both the fund’s first investment and its first exit.
At the time of investment, InMedica operated 18 primary care clinics generating approximately €10m in annual revenue. By the point of sale, InMedica had scaled to 89 facilities, serving over 310,000 patients annually with revenue exceeding €150m. It had also become the largest private healthcare network in the country – three times the size of its nearest competitor.
Value creation
There were clear transformation opportunities from the start, recalls Nerijus Drobavičius, Partner at INVL Baltic Sea Growth Fund and INVL Private Equity Fund II, which focuses on investments in the Baltic States and neighbouring regions.
For one, when INVL first began exploring the market, the team noticed that Lithuania’s private healthcare sector consisted of numerous small, GP-led clinics:
“The GPs were handling the logistics, supply, medical work, administration: everything. They started to struggle – they didn’t want to be administrators, CEOs, or shareholders of a small company. They wanted to be doctors,” explains Drobavičius. This revealed the first growth opportunity: consolidating these practices and centralising their operations – creating a more efficient superstructure.
As INVL investigated further, it became clear there was also significant potential to broaden InMedica’s service offering. Moving beyond primary into secondary care, the company could introduce specialist services such as gynaecology, cardiology, urology, ophthalmology, and others.
Combining these two opportunities, the team saw fit to restructure the service delivery model. At the time of acquiring InMedica, the network’s clinics each offered a limited mix of services, which could require a patient having to visit multiple locations for treatment.
The solution, as implemented by InMedica, was a hub-and-spoke model wherein a central hub would house specialists and high-end services, while smaller, local family clinics – the “spokes” – would refer patients to the hub when advanced care was needed.
The exit
Discussions about exiting InMedica began in 2023. With the war in Ukraine ongoing and the construction of a new hospital in the pipeline, the team recognised that it would likely take a few years to come to fruition.
“The company was performing well and had a solid pipeline for future acquisitions,” recalls Drobavičius, “but it hadn’t peaked – there were still plenty of consolidation opportunities in Lithuania, with a strong management team to lead the way.”
One such area, which he still sees as an opportunity is mental health – a sector that boomed during Covid. “There are many small private psychiatry clinics in Lithuania. If I were starting out again four years ago, I’d be looking to consolidate them,” he says.
INVL kept the exit under wraps, sending out materials to those who expressed interest during conferences or one-on-one meetings. The sale, which reportedly had good competition to the last moments of negotiation, ultimately went to Mehiläinen.
With a history going back 115 years, Mehiläinen is a private provider of social and healthcare services, with a presence in Finland, Sweden, Germany, and Estonia. It serves 2.1 million customers annually, and services are provided at 840 locations by more than 37,000 employees and private practitioners. Following this transaction, Mehiläinen also acquired leading healthcare providers Regina Maria in Romania and MediGroup in Serbia.
“What Mehiläinen especially values is the InMedica team; they’re highly motivated. With this acquisition, they’re counting on that management team to facilitate expansion beyond Lithuania,” Drobavičius says.
The bigger picture
Private equity has increasingly targeted healthcare as a high-growth investment area, with Bain & Company recently reporting a surge in deal value in this sector across 2024, owing an increase in large-scale transactions. However, healthcare exit volumes have remained relatively low, down 41% from their 2021 peak.
The role of private equity in healthcare remains pertinent in places like Lithuania where change is needed, explains Drobavičius.
“The gap lies in public sector inefficiencies – particularly the long queues for certain procedures” explains Drobavičius.
In his view, private and public healthcare are part of the same ecosystem: “Rather than competing, they should support one another, with the private sector addressing gaps in underprovided services, and complementing the public system where it’s most needed.”
