Private Markets 360° | Episode 41: Building Better Businesses

View Full Transcript

Christina McNamara [00:00:01]:

Welcome to Private Markets 360, your insider's guide to the world of private investments. Today we are joined by Cathrin Petty, Managing Partner, Co-Head of North American Private Equity and Global Head of Healthcare at CVC, whose career spans over 3 decades at the intersection of science, finance, and global investment. Cathrin began her journey as a scientist at Cambridge University, before transitioning to finance at Schroders Bank in London, when she gained broad exposure across financial disciplines and investment management. Her professional path reflects a truly global perspective with extensive experience in healthcare, private equity across India, San Francisco, New York, and the UK. After spending over 15 years focused on healthcare at Apex and JPMorgan, Cathrin joined CVC in 2016. To launch and lead the firm's healthcare group, building a differentiated portfolio now valued at approximately €26 billion and spanning services, products, and outpatient care. Cathrin's leadership has helped position CBC as a global force in private equity, guided by the philosophy of think globally, act locally. With 30 offices worldwide and a culture that emphasizes partnership and strong alignment between LPs and management teams.

 

Christina McNamara [00:01:18]:

Today, she'll share her insights on navigating the challenges and opportunities in the North American PE investment landscape, the evolution of CBC's strategy, and the critical lessons learned from building a resilient and innovative healthcare portfolio in a period of maximum uncertainty. Welcome to Private Markets 360. It's a pleasure to have you with us today. How are you?

 

Cathrin Petty [00:01:39]:

Christina, thank you very much for having me on your podcast today.

 

Christina McNamara [00:01:42]:

Thank you for joining us. So Cathrin, you began your career as a scientist trained at Cambridge before moving into finance at Schroders. How has your scientific background influenced your approach to investing, particularly in healthcare?

 

Cathrin Petty [00:01:58]:

Well, I acknowledge it's a non-conventional start to investment and to private equity, but I do think that there are some really important learnings from it, and I think it reflects a little bit the mentality that we have at CBC and the type of people that we actually hire who are quite non-traditional in many respects. So as a scientist by way of background, I think that the applications that we use, the specific methodology, you know, forming a hypothesis, actually testing that hypothesis, and using your judgment over the data you collect to draw conclusions is very much what we do day to day on the investment side. I think it gives you a very wide landscape to aggregate data, challenge assumptions, and to really actually come up with your own individual views, which might be quite different to that of many in the mainstream. And so So I think it does give me a bit of a differentiated perspective on things. And I think particularly as I moved into the healthcare investment side at the very beginning, it gave me a very different perspective and window on the world of investment in healthcare because we were able to invest at the waterfront from research and development stage businesses, actually on the pharmaceutical and medtech side, through to actually outsource services to them, and then right the way through to the outpatient and provider space. So it really formed a very different perspective and one that I think has taken us into rather contrarian views, which over the course of the last 30 years has actually continued to be consistent, but also created some pretty differentiated returns across our portfolio.

 

Chris Sparenberg [00:03:35]:

Kathryn, that's wonderful background. Would love to take a step back here and ask what motivated you to join CVC in 2016 and establish its healthcare group? And what was the vision for the platform at that time?

 

Cathrin Petty [00:03:48]:

It was a really interesting time because CVC had built this extraordinary global network across, as you say, over 30 offices around the world, had a tremendous reputation for being one of the highest quality investors actually in the world, but particularly across that European and Asian platform, and yet had not really done anything in healthcare. So for me, the opportunity was to come in and actually create a de novo portfolio from scratch to build a strategy. And I created a business plan. Beforehand, before I joined, that I discussed with the board of the types of investments and businesses that I wanted to go after that I thought would be differentiated to what the sort of broader marketplace was investing in and that really played to CVC strengths. And CVC strengths are really this great global network, backing great management teams, and actually really building companies for high performance. We're all about performance and how do you take a good company and make it a great company. And so that was very much the opportunity that I saw with the size and scale platform that we had, to be investing in a lot of these product-based businesses, services-to-products, healthcare, IT, et cetera. And I think bringing that all together and harnessing that network around that sector expertise was exciting for me.

 

Cathrin Petty [00:05:04]:

The other two things that kind of coupled with it were bringing that kind of conviction and increasing that deal origination funnel for the organization was a really exciting opportunity. And it aligns very much with the CVC kind of DNA. Which is highly entrepreneurial and actually really all about bringing together elite teams to go after these differentiated businesses. And that we can pull together these teams very effectively because we have a pretty unique model where we actually have this very concentrated deal-by-deal carry model, which enables us to pull together the best people around the world, be it from Europe, Asia, the US, and our sectors and operations team to really create the best in class to go after each individual individual situation. So that to me was pretty exciting.

 

Chris Sparenberg [00:05:54]:

And it sounds like your career trajectory has kind of followed that approach. So not only are you the global head of healthcare, but in 2025, you were appointed co-head of North American private equity at CVC. Tell us how you're applying that global experience to the North American market and, you know, more broadly across sectors.

 

Cathrin Petty [00:06:14]:

Well, Chris, thank you so much. And, you know, it's a real privilege to be asked to actually move to our US office in order to actually head up the North American business. And great co-head, Lorne Somerville, that actually I work with together on it. I think what's really exciting is that the US, in spite of the challenging environment, is still the greatest market in the world for private equity, finance more broadly, and also actually for the sectors within which we're focused, healthcare being one of them, but also our financial services, tech, business services, and also sports, media, and entertainment. And as we look across those sectors, both Lorne and myself come from deep sector expertise. He founded and set up the tech business actually for CVC. I founded and set up actually our healthcare fund sector. As we came together, it was a natural opportunity for us to step into the US market, to bring together this global network and really accelerate the investment actually in our sectors and make sure that we're taking the very best of that capability from CVC, be it the global network, be it the operations team that's really built for this performance, or our capital markets team, which is also one of best in class.

 

Cathrin Petty [00:07:27]:

And so we felt there was a real opportunity to actually increase our market share in the US and to go after more of these rather differentiated deals, either with founders and invest and families, or actually looking at these complex carve-outs, which we've done a lot of as well.

 

Christina McNamara [00:07:43]:

And so over the course of your career, I'm sure you've seen lots of market shifts. And so I wanna dive a little bit deeper and can you share a specific example of a transformative investment and what has made it successful?

 

Cathrin Petty [00:07:59]:

Absolutely. And a number of different examples to think about around that. So, you know, if I think of two, if you'd like, different bookends, one of which was a highly complex carve-out that we did from a company called Teva, which is an Israeli-based company, but also NASDAQ listed. And they had a portfolio of products in women's health that they were looking to exit. We had a thesis that we wanted to build a state-of-the-art women's health business ex-US that was actually both providing sort of democratized access to great healthcare for women, but actually doing it in a highly efficient and very technology-enabled way. So we carved out these 27 products. They were around the world in 52 jurisdictions. So we worked with our global network to pull that together.

 

Cathrin Petty [00:08:46]:

We had a fantastic ops team supporting us to do that, and then built with a great management team, a brand new company from scratch. And we hired 550 people in the first 18 months. Built all the technologies and systems from scratch, stabilized a business that when we bought it had been declining top line 10% per year, and then built this really great go-to-market capability, which both educated practitioners and patients, and then used state-of-the-art technology to ensure that actually we had the ability to launch to market new products. And we did it in the middle of COVID which was not just challenging, but because we'd adopted this great tech platform and we trained up all of our go-to-market sales force on it, we were able to launch new products even during COVID when actually people couldn't get access to physicians. And as a consequence, the business transformed and the top line was growing north of 16% actually when we sold it. And we sold it about 18 months ago. And that's a business that continues to perform extremely strongly and very well. And so, that's an example where we literally had this hypothesis I talked about before, about having a thesis that women's health was an important area for us that had been underinvested in over the last 30 years, that we could bring a differentiated view to that market and actually just, you know, state-of-the-art technology.

 

Cathrin Petty [00:10:10]:

And that's what we did. And then separately, we've actually, at the other end of the spectrum, actually worked with great family businesses, companies like the Raccordati family, where they're actually— this was an Italian headquartered company founded by the grandfather with 4 family members still involved in the business, and 48% of the business was public, 52% was owned by the family. And there, we were able to work with them to create a solution which enabled 3 of the 4 family members to exit the business. We could come in, keep the company public, but actually invest around a new strategy to really take the business more aggressively into the US, into Asia and Japan in particular, to build a global rare disease business. And we've been doing that over the course of the last 6 years. So very different types of situations, but really solving for a thesis that was in the one case, building a state-of-the-art women's health business across Europe and the rest of the world. And in the other, building a global rare disease platform.

 

Chris Sparenberg [00:11:12]:

It certainly sounds like two really great representative investments and, you know, two where you've explained a ton of challenges in these underlying businesses and in the underlying environment. And I think that's where we want to go next with this conversation is in general, the private equity investment environment. Is seeing a little bit more uncertainty. We're seeing policy and geopolitical volatility. You know, we see an ongoing conversation about valuations, although it seems like maybe that's returning to normalcy in some areas. And you've had some success with exits, but certainly others have been challenged. These are all really hot topics. How do you navigate these challenges to continue to find attractive opportunities and to stay active in the market?

 

Cathrin Petty [00:11:56]:

Chris, it's a great series of questions in there to really unpack. You know, it is, I think, the most challenging environment that I've invested in the last 30 years. I think that, as you rightly say, the geopolitics is the most uncertain that we've seen, certainly in decades. And the uncertainty across the markets and the disruption of AI across so many new areas that we haven't even yet begun to properly understand, that I think that is creating just a lot more risk around investments than we'd seen really over the, pretty much over the last two decades. But I think what's really important is that in this environment, there are great opportunities. And this dislocation is usually a time when actually CVC, we've done extremely well. If we look back over the last 40 years of CVC, we've tended to outperform in these periods of dislocation. And I think some of that is because We're really good at creating bespoke solutions to situations, working hand in hand with the vendor to create something that's a win-win for both sides.

 

Cathrin Petty [00:12:59]:

We've recently made two new investments in the US, both of which have been with founders, both of whom were looking for long-term partners to create a solution actually for the business. One is GLI, which is in the gaming regulatory space, and one actually is in the insurance space, Bamboo, which we did there alongside a founder. And so we're really able to work with them to understand what those risks are, what the opportunities are. And because a lot of our thesis is around creating value through accelerating top-line growth, really using technology and adopting it, and driving efficiencies and operational leverage, we don't tend to over-leverage our investments. And we have a much lower leverage level than many of our peers. So as a consequence, that does give us a little bit more flexibility in our capital structure to adapt to uncertainty. And to make longer-term investments, which in an environment like this, I think is critically important.

 

Christina McNamara [00:13:57]:

And healthcare is really at an inflection point right now. We see technology accelerating, patient expectation shifting, capital flow into innovation has been greater than ever. What trends or disruptive forces in healthcare, such as medtech or healthcare IT, are you most excited about from an investment perspective looking forward?

 

Cathrin Petty [00:14:20]:

It's an incredibly exciting period actually in healthcare, but also really challenging. Both the sort of the administrative changes and the uncertainty that we've seen around CMS and actually some of the funding out there is creating a lot of complexity around end markets. At the same time, the demand, particularly from the sort of demographic shifts that we're seeing across all of the Western markets, but not only actually, we're seeing it across Asia too, is creating demands and expectations pretty much unlike anything we've ever seen before. And so, it's all about, from our standpoint, thinking about how do you deliver, in a highly efficient manner, the best possible products and outcomes for patients. And that might well be state-of-the-art innovation that actually enhances patients' quality of life or actually enhances patients' medical treatment. And medical devices, we think, particularly has been an area where many of our peers have shied away from, but where we think that there is tremendous opportunity in this environment, be it from our investments in ophthalmology, in heart-lung machines, or right the way through to actually autoimmune management like Theracos. Actually, we think that's a really important area to be focused on. And at the other end, we are going to have to adopt technology faster than ever before in order to deliver the efficiency at scale that actually, you know, this demographic shift is actually driving.

 

Cathrin Petty [00:15:49]:

And so the increased aging population, the increased, actually, amount of chronic disease means we've got to get better at diagnosing, identifying those patients, treating them in a more efficient manner, managing the sort of the labor resource allocated to them in both inpatient and outpatient settings much more effectively. So I think for us, across the board, technology has to be an enabler here. And the question really is how are those technology companies using AI to actually maximize their efficiency and maximize those clinical outcomes actually for patients and providers.

 

Chris Sparenberg [00:16:25]:

I love what you're taking us through there because you're not only investing in companies who make an impact on the populations, the customers that they serve, but you're also looking at your own adoption of technology to improve those companies, which, you know, has a knock-on effect to their impact. I want to shift the conversation to partnerships and carve-outs, two of the key parts of CVC's strategy. Can you take us through some of the creative solutions you've implemented when working with family-owned or corporate carve-out situations, and maybe some of those impacts where technology adoption and just your ability to add value have made an impact on those companies?

 

Cathrin Petty [00:17:04]:

Yes, absolutely. I think that, and they're two very different types of approaches to businesses, but fundamentally it all goes back to our thesis, which is how are we gonna build a better business here? How are we building these businesses for performance? And very many of the family-owned businesses that we've invested in, are incredibly well-run, very cautiously, thoughtfully managed businesses that have been built up over many decades. We've done that across the US with companies like Asplund, with the Pilot family businesses, now actually also recently with both Bamboo and also with GLI. And so these businesses have been really carefully stewarded through multiple cycles, actually, and have really had a very thoughtful balance of sort of risk and reward as they've been building them up. But what we're really pretty good at doing is coming in and providing a fresh perspective, which might be around accelerating the ambition in some areas or piloting and testing opportunities in other areas, which the family, when they had 100% of their assets under one investment, actually may have been more cautious to do. And so, to give you a couple of examples, when we moved into Recrudescens, the family had never made an investment more than a couple of hundred million. By the time that we actually invested in the business, even though the company had been around for about 80 years. And for us, we actually worked with them over the period of 16 months to create a new business plan that said, how do we take what is a really good company today and make it a great global rarities business? How do we actually build that capability of people and invest in the US, across the rest of Europe and the Middle East, and also into Japan? How do we actually adopt state-of-the-art pharmacovigilance and technology to really manage that patient population? And then how can we help you accelerate investment into those areas by acquiring either portfolios of products from relationships that we had with the likes of Novartis, AstraZeneca, and others, through to actually also helping them to take more risk and invest in clinical-stage assets that led us to the acquisition of a company, in that case, called EUSA.

 

Cathrin Petty [00:19:20]:

And so we built this portfolio with them that aligned with this sort of 10-year strategy of how we felt we could transform the business and take this to the next level. And we've done that. When we invested, the company had about $340 million of EBITDA, and today we've just announced the public results and the EBITDA now is close to a billion of EBITDA. So you see how that company's progressed, but importantly, how you've built this global capability. I think when you look at carve-outs, it's very different. Carve-outs are an incredibly complicated situation. And many of the large corporates that are doing these carve-outs actually are doing them for the first time. There's very few carve-outs where the management and the teams have done this repeatedly.

 

Cathrin Petty [00:20:03]:

It's hugely disruptive to the organization, and quite often they don't really understand actually the complexity of the businesses they have to separate out. So sometimes it's pulling together all of those people across their organization to try to help them to get to the bottom of it. But sometimes it's really us working with them to help define the perimeter of the business that they're really looking to carve out. And it's one of the reasons that carve-outs work most successfully when it's a smaller group of parties that are working with the vendor to actually do that carve-out, because then you can create solutions that work both in terms of the timing of the carve-out, the ability to deliver the complexity of things like IT systems, regulatory, pharma provisions, whatever it might be, right the way through to actually ensuring that the people transferring across are clear in that transfer, and that actually you've got a vision of where that business is going to go forward so that there is a cultural alignment with the people that are coming across too, which is also very important in making sure that these things are a success. We carved a business out from Mallinckrodt in the US about 15 months ago, and that new company is called Theracos. And it took us 4 months to actually sign the transaction, go from sort of initial diligence to signing. And then actually, we delivered the entire carve-out within 6 months of signing to get to closing. And I say that because that required a huge amount of effort and investment from our side to do that.

 

Cathrin Petty [00:21:34]:

But because we were working actually with them, because we've done a lot of these carve-outs before, we have a playbook and we have an operations team that is led by very experienced carve-out people where we can pull together and build all of that relevant expertise to ensure that not only is company stood up on its own two feet quickly up front, but really importantly, that the parent entity is actually able to exit the business in a very clean and very efficient manner so that then they can carry on with their future growth. And one of the reasons that many companies, in the case of Mallincourt, wanted to divest this asset, because they needed to delever, they wanted to get on and rebuild their strategy elsewhere, and the faster they could actually get out of the carve-out, the faster they could go on and rebuild the business. So they were thrilled that we actually said and did everything that we said we would do on time and on budget that enabled them to go on and accelerate their strategy elsewhere.

 

Christina McNamara [00:22:34]:

So it's very clear that CVC emphasizes partnerships and is a huge component of the growth strategy. CVC also has a quite unique and more capitalistic culture compared to its peers. How does this culture translate into your dealmaking and portfolio management?

 

Cathrin Petty [00:22:56]:

Christina, it's a great question. For a European-headquartered firm, we're very capitalistic in our approach, as you rightly identified. This is actually the thing that makes CVC so unique and one of the other things that attracted me to it, because it attracts people who are real self-starters and really highly motivated, because our compensation is really all driven by the upside in the transactions that you can deliver and get done. So the deal our team shares uniquely in the deal carry of the transactions that they do. And if those are successful, the team works extremely intimately alongside the management team and is totally aligned with that management team and also the LPs at driving that outperformance and those returns. However, we also have a negative offset. So in the event that those investments don't perform, that gets offset against our future investments until that is regained. So that creates the final piece, which is this very low loss ratio across the portfolio.

 

Cathrin Petty [00:23:57]:

And when I was joining CVC, that was very important for me because it's not just about the consistency of the returns, but it's also about having this low loss ratio. And that is so important when you are both investing yourself personally into these funds, but actually also when you are really looking to drive that upside, you know, over your career because that alignment with the investors and management team is pretty unique, and it's one that was extremely attractive to me in joining. In order, when you are bringing in senior people from the outside, you've really gotta be confident that you are going into a model that really is gonna deliver.

 

Chris Sparenberg [00:24:33]:

That performance culture definitely has a way of attracting the right people with the right motivations. So it's gotta be, it's gotta make for a really exciting place to work. We've also talked about CBC's Think Globally, act locally philosophy a little bit. And I'm curious how you see this reflected as you're instituting this culture. You have 30 offices worldwide. You have this philosophy and other things guiding your portfolio construction, how you do deals. Can you tell us how this, you know, global yet local approach impacts your investment process and your portfolio construction?

 

Cathrin Petty [00:25:13]:

Yes, absolutely. And so some of it is top-down, but quite a lot of it is also sort of bottom-up. So top-down, we actually have this very balanced, diversified approach to investing. We have no single investment that's 10% of the portfolio. We don't have a country or sector concentration. We don't have any country or sector that's above 20% of the portfolio. And so therefore, as a consequence, you are constantly managing for this diversification, which in an environment like this is also particularly powerful. I think the second part of it, which is also really interesting, is that because of the nature of this model, It means on the one hand, you can attract together great talent from around the world on any situation.

 

Cathrin Petty [00:25:55]:

So, if I'm looking at a business like I am right now in the US, but which has got a global footprint from Asia, Southeast Asia, right the way through to the Middle East and to the US, then actually, I can pull together anybody from our teams around the world to work together on that, from our, you know, Japanese office, actually from our Singaporean office, right the way through. And so, we can align those global deal teams very quickly around a situation. And right up front, everyone knows what their role is on the transaction. And right up front, we're actually very clear in allocating how that responsibility and therefore the economics actually also work. So that's the one hand. The second hand, however, is that when you've actually created that portfolio and say you have a portfolio of somewhere between 5 and 7 portfolio companies, that in itself is pretty rate-limiting because it's a very full-on portfolio then to manage. These are very active investments that we tightly monitor with our ops team, but actually our deal teams are the same deal teams on the investment from the beginning right the way through to the exit. And as a consequence, you actually are constrained by how many of those you can effectively manage.

 

Cathrin Petty [00:27:05]:

So at any one time, you're somewhere between 3 to 5 boards that you're on and 5 to 7 portfolio companies. So that becomes a little bit of a rate-limiting step in in terms of that bottom-up concentration of portfolio as well. So that's the way, both top-down and bottom-up, that we manage it. Top-down, the investment committee looking through on where that portfolio concentration and construct is coming from, but that bottom-up is also very important, looking at every deal in its own right, but every deal team actually knowing what their capacity constraint really is.

 

Christina McNamara [00:27:37]:

And with the relationships you have to maintain, it's really at the intersection of strategic and financial priorities, which means the alignment really matters. How do you ensure strong alignment between LPs, the management teams, as well as your internal deal teams? And why is that alignment so critical to CBC's approach?

 

Cathrin Petty [00:28:01]:

It's a great question, Christina. It's, again, it really goes back to our sort of our model of actually incentivization. So we are all incentivized around the money on money that we're delivering actually actually for our LPs. And we're very blessed to have actually very longstanding LPs that are from, you know, the top global investors in the world. And of that LP database, the vast majority have been with us for over 30 years. So it's really longstanding and really sticky. And it's because of this model, because we are all very focused as investment officers on this money-on-money return, because that is our incentivization model and also management's, as well as aligning with LPs. It means we don't charge fees on our portfolio companies for arrangement of financing, for entry or monitoring or exit purposes.

 

Cathrin Petty [00:28:55]:

So we're very fee light, and we're all about actually this money-on-money capital gain and how are we driving that value. And so the alignment of the deal team, be it the sector investor, be it the country investor, the capital markets and the operations team, that's aligned up front. Alongside management who knows that we're with them through both the good times and the bad. Because when things go wrong and you've got your investment in the ground, you're going to do everything you can to lift your way out of that. And then actually, it gives that unique alignment with the LPs because we're actually not taking much out of, in terms of the fee pool and managing these companies. We actually are all about that money-on-money multiple. And that alignment with LPs, as well as the downside protection that they see, is something that actually gives them great comfort and that consistency of return.

 

Christina McNamara [00:29:45]:

So private equity as a whole plays such a powerful role in shaping companies and industries. I think through our discussion today, we've seen that. For young professionals looking to enter into the world of private equity, what advice would you give them?

 

Cathrin Petty [00:30:03]:

That's a great question. This is really one of the best industries in the world. You have the opportunity to work with some of the greatest management teams who are are really motivated across a broad array of sectors with a constantly evolving marketplace at pace. And you really have the ability and the privilege on the private equity side to work intimately with these teams and to be very agile in terms of how you adapt and invest according to the environment. And there's very few other places where you have really the benefit and the privilege of doing that. So what I would say is actually to young people coming into it today, be curious. Don't be afraid of actually the sort of storms out there on the horizon. They create opportunities to try to actually peer through those curtains, if you like, to see where the opportunities sit on the other side, to always actually be curious about challenging those assumptions.

 

Cathrin Petty [00:31:00]:

Never take what is given as granted, but really to go back there and test the assessments. Some of the brightest guys I've seen in our teams, actually, they've come back and they've challenged the assumptions that have been sort of folklore almost from some of the consultants or people out there and actually have come up with a very differentiated view. And so, if I look at our teams, build that diversity of team, build curiosity within that team, but I also think most importantly, this industry is an experiential industry. And so, it's about being resilient, it's about being patient, it's about investing for the long term. And at the end of the day, if you continue to do that, you will not only actually have a very fulfilling career, but actually you'll be highly successful with it.

 

Chris Sparenberg [00:31:46]:

Thank you, Kathryn, and thank you to our audience for joining this episode of Private Markets 360. We had the privilege of hearing Kathryn Petty's perspectives on the evolving world of private equity. Cathrin journey from scientist to global investor has not only shaped CVC's differentiated approach, but also illuminated the importance of partnership, innovation, and resilience in navigating today's complex market landscape. We explored how CVC's "think globally, act locally" philosophy drives value across borders, the creative solutions powering transformative carve-outs and partnerships, and the trends set to redefine healthcare investing. Cathrin's insights offer inspiration and practical guidance for industry veterans and young professionals a like. We appreciate you tuning in and hope you found this discussion as engaging and insightful as we did. Don't forget to subscribe to Private Markets 360 for more expert conversations and market intelligence. Until next time.