PRIVATE COMPANIES - HEALTHCARE
What's Mike Fernandez's Encore?
Mike Fernandez's healthcare companies have returned an average 133% a year over the last 15 years.
Fernandez sold his airline healthcare insurance business — cashing out would become one of his hallmarks — but stumbled in his next venture, a database of group health insurance information that he expected agents would buy so they could comparison-shop for rates. Instead, insurers wanted it. “It took a couple years to figure that out,” he says. “I told you I wasn’t very smart.”
As a prelude to a public offering, he had borrowed against his home. When the offering fell apart, he says, his accountant and attorney recommended he file for bankruptcy. Instead, to pay his creditors, he sold his home and his car and moved his family in with his parents. Alvarez, by that time at Greenberg Traurig, remembers Fernandez coming to ask about his recourse in the underwriting fiasco. “He was really hurting,” says Alvarez. He counseled Fernandez that instead of spending up to eight years in a “negative way” litigating, he would do better by doing something positive with those years.
Fernandez with his wife, Constance. Fernandez’s relaxed demeanor belies his drive to succeed. “My doctor will tell you that I internalize it,” he says. [Photo: Eileen Escarda]
So Fernandez focused on building the company, selling it in 1990 to Ramsay HMO, for which he became an executive. In 1993, he founded a Tampa-based HMO, Physicians Healthcare Plans. He sold that company in 2002; the same year, he founded another HMO, CarePlus, which he sold in 2005. Together, the two sales grossed $607 million.
He and his co-investors in CarePlus gave $28 million of their take to employees to reward them for their contribution to CarePlus’ success. Fernandez also has been a major donor to his high school alma mater and to the University of Miami and local non-profits. “The opportunity this country gives to people who are not born here is unique,” Fernandez says. “I could not have gone from Cuba to France and been accepted the way I was accepted here. I could not have gone from Cuba to Venezuela. Only America is such a unique, wonderful, vibrant, beautiful country (where) things happen magically.”
His thinking was reinforced by the fear and economic stagnation he saw in 1998 on a return to Cuba to visit his dying grandfather. In his old home, he found a family still using the same furniture his parents had left 34 years earlier. A childhood friend still rode the same bicycle Fernandez left in 1964. Another friend became a hero to the regime fighting for Cuba in Angola, but then had been jailed for five years for taking milk from his barracks for his daughter.
As soon as Fernandez cashed out of CarePlus in 2005, he formed a $240-million private equity firm, MBF Partners, with two executives he had known for years, Marcio Cabrera and Jorge Rico. They sift through 300 companies a year to find a handful that suit their parameters: Operating healthcare service companies — no startups — with $5 million to $25 million in annual earnings, companies to which the partners can contribute expertise as well as capital.
Fernandez, a strategist and deal maker, also is strong operationally, “which is unusual,” says Coral Gables developer Armando Codina. Says fellow entrepreneur Carlos Saladrigas, “He can see an opportunity when other people will pass by.”
To go after more opportunity, Fernandez and his partners raised $172.5 million in 2007 to start a blank-check company called MBF Healthcare Acquisition Corp. The blank-check vehicle is a tactic used by Fernandez’s longtime investor and friend, Phil Frost, founder of generic drug maker Ivax, as a fast, low-cost way to raise money and take a private company public. Joining Fernandez’s board were Saladrigas, Roger Medel, founder of Sunrise-based neonatal physician provider Pediatrix, and Antonio Argiz, managing partner of Miami-based CPA firm Morrison, Brown, Argiz & Farra.
Fernandez’s blank-check plans to pay $420 million to buy a fast-growing private firm, Critical Homecare Solutions, based in Conshohocken, Pa. The company, with $210 million in annualized revenue, acquires home infusion therapy providers and aims to be the leading infusion therapy company in the nation. The market for infusion therapy outside the hospital setting is $11 billion to $13 billion a year and is highly fragmented, with 1,000 to 1,200 providers, says Russ Bodoff, executive director of the National Home Infusion Association. But it’s consolidating. Walgreens recently spent $850 million to acquire Illinois-based infusion therapy provider OptionCare.