Medical Sector Focus Delivers Healthy Returns

With the future of health care reform more than a little hazy, opening an investment banking office with a significant focus on health care services may seem risky.

But not if you’re concentrating on the right companies, according to Alexander Faust, managing director and partner of boutique investment bank Excel Partners.

“There is big uncertainty amongst all reimbursement-dependent health care service providers (such as doctors and hospitals),” said Faust. “However, there’s very little uncertainty with respect to the service providers that we cater to: predominantly people who make health care service providers more efficient and more cost-effective.”

Excel is targeting privately owned companies with revenue between $20 million and $200 million in markets such as health care information technology and medical devices.

The 48-year-old opened Excel’s West Coast office in Santa Monica in summer 2009, after the firm was launched in 2008 by two colleagues in New York. But why Los Angeles?

“There’s great opportunity for us here because we have established access to industry players,” said Faust. “And since we’re an independent firm, we only take on deals that we feel we can complete successfully,”

Last year, Excel closed six transactions out of the New York office, including assisting Perseus LLC with its acquisition of Physicians Interactive. Faust said he’s in the middle of working on the firm’s first couple of deals out of the new office.

Investment banking in California isn’t what most German-born lawyers end up doing. But Faust has been forging his own path for decades. After a year of practicing commercial banking law in Germany, Faust came to the United States, attended NYU law school and joined New York’s White & Case LLP.

After returning to Germany in 1994 to work at an international law firm, he was recruited by Goldman Sachs for its M&A group in New York in the late ’90s. Faust ultimately was promoted to senior banker but left to start his own international M&A advisory firm. He then moved west in 2005 and joined Barrington Associates, but the boutique Brentwood investment bank was acquired by Wells Fargo Securities just a year later and once again found himself at a large company.

Now, back at a small firm, Faust believes his experience and relationships can most benefit midmarket companies.

“The needs of the market right now are creativity, access to deals that are scarce, and ability to get deals done. How do you get deals done? Through relationships and superior execution skills,” he said.