<3 years, a €525M exit, 10x sponsor MOIC. We X-rayed Simago, the radiology rollup that galvanised the French rollup mania

Disclaimer: Unless noted otherwise, views and analysis expressed here are the author's own and based on public sources. The article is intended for informational and entertainment purposes only. This is not financial advice. Please consult a professional for investment decisions.

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The mainstream media is all over France - for all the wrong reasons. 4 governments in under 2 years. A country addicted to the welfare state. A country sinking under an inexorably rising pile of debt.  

While this is not entirely untrue…you don't subscribe to Rollupeurope for the extra kick of pessimism, do you?  

Par contre, our French readers are saying the economy is fine and the animal spirits are very much alive. Don't believe me?

What if I told you that a rollup mania is sweeping France, with multiple independent sponsors raising double-digit million equity rounds?

Two accountancy rollups raised within weeks of each other, backed by Strada (Numeris) and Otium (Group Archipel), respectively. HVAC. Dentists. Medical device distribution. Managed Service Providers.     

We trace the beginning of this mania to the 2022 sale of the radiology practice rollup Simago to the private equity firm Ardian, for €500M+. 

OF COURSE PE firms love radiology.  

High barriers to entry, juicy gross margins, non-cyclical demand. Better still, there are barriers to entry due to a quirk of the French legislation that restricts ownership / voting rights in medical practices (SELs - Société d'Exercice Libéral) by non-physician third parties to 25% (source). 

A bit like anesthesia rollups - which we covered in this article - but much less controversial.

What’s so special about Simago? 

Well, consider the fact that Simago was <3 years old when it got sold at that €500M+ valuation. Its two founders, Charles-Henry Beglin and Clement Martin were 32 and 31 at the time. It was not majority institutionally owned. Nor was it backed by brand name search fund investors. Simago’s only institutional investor is Entrepreneur Invest: a relative minnow with <$1B in assets under management. How many of you outside of France have even heard about Entrepreneur Invest?  

The Simago / Ardian transaction might well be one of the craziest independent sponsor exits in Europe to date. In this article, we break down:

1. The history of Entrepreneur Invest and its bespoke investment structure

2. Step-by-step account of Simago’s impactful first year 

3. Simago’s M&A playbook - and how to deliver killer returns despite ownership restrictions

4. Simago return math 

5. What insights can we draw from Simago’s exit? 

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1. The history of Entrepreneur Invest and its bespoke investment structure

Entrepreneur Invest, or EI was founded in 2000 as a VC firm. In the aftermath of the Global Financial Crisis, it pivoted to SMB investing after a change in tax regime made its core product less attractive. EI stood out in the crowded lower-mid-market by having a more lightweight approach both when it came to portfolio company reporting and to internal processes.   

The EI partner Marouane Bahri seized the Zeitgeist by kickstarting a buy & build franchise with platforms such as Chronos Dental (dentistry); SATEP (HVAC); Omnes (medical device distribution); Simago (radiology)... and many others. Marouane had few qualms about backing founders who were not only young (often in their late 20s) but also lacked extensive investing experience.   

Another attribute of EI backed rollups was the extensive use of convertible debt, known as Obligations Convertible, or OC in French. Across the 5 raises that occurred between February 2020 and March 2022, there was c.€14M in convertible debt financing. Key features:

• Conversion ratios: 15.5-30%

• Cash coupon: 0-5%

• PIK coupon: zero for the first tranche, 2% for subsequent tranches    

We have been told that part of the convertibles were used as a reinvestment scheme for the sellers.

Simago was neither EI’s first, nor only rollup exit. And yet it captivated attention like no other transaction in what is otherwise Europe’s 2nd largest PE market. We will show you exactly why. 

2. Step-by-step account of Simago’s impactful first year

Simago was formed in August 2019 by Charles-Henry Beglin (PE investor by background) and Clement Martin (consultant). Rumour has it that Charles-Henry shocked colleagues at Permira by surprise resigning and forfeiting a fairly secure, low 7 figure carried interest balance. Like the Röko founder Thomas Karlsson, he must have known that a far bigger prize awaited him, intellectually as well as financially. 

If you missed our story on Röko, make sure you read this one: Walking away from a $6M/y job to build a $600M+ revenue HoldCo. Our take on Röko, Sweden's newest unicorn

Taking a step back, as a genre radiology rollups emerged in the early 2010s in the U.S. Within a decade, the proportion of physicians working for PE backed platforms such as LucidHealth, Radiology Partners and U.S. Radiology Specialists grew from practically nothing to 12% nationwide, and as high as 24-27% in places like Texas and Florida (source). 

France has 5,500 radiologists (source): 1/6th of the U.S. market size, and a figure that has flatlined over the past 15 years even as the underlying expenditure swelled from €2.5B to €3.1B. 

Succession is a hot topic with 37% of all practitioners aged 60+. The majority of practices have between 2 and 12 practitioners: the sweet spot for rollups like Simago. One-man shows are too risky. Larger practices have too many decision makers to be corralled. 

Core insight: a market this lucrative and this fragmented doesn't need to be cornered to produce generational wealth. Simago’s competitors past and present include IMDEV, Résonance Imagerie, Imapôle/Imaone, Vidi, France Imagerie Territoire…and others.

It is a fairly long list - but so what?

By mid-2022, when the Ardian transaction happened, Simago was tracking €80M in revenue. It finished the year at €100M, implying a mere 3% market share. That didn't matter, as Simago was doing over €30M in EBITDA: plenty to get Private Equity firms excited. 

How was this deal spree funded?  

At the outset, Beglin and Martin each owned 50%. In February 2020, they welcomed a third co-founder: Roger Bernard, a career radiologist in his mid 60s. 

EI came onboard at the same time, pitching in with a €3M convertible. This 5-year instrument carried a cash coupon of only 5% and a conversion ratio of 30%. Pre-money equity value was set at <€2M. 

According to public records, by October 2020, EI followed up with OC #2. Equity value had surged to nearly €20M. Simago’s investor ranks swelled with the addition of healthcare investing experts like Mubasher Sheikh (ex McKinsey partner who leads Permira’s healthcare team - Charles-Henry’s former employer); Arnaud Sautet (a healthcare consultant to PE firms such as Bridgepoint); and Groupe Finoli, an independent sponsor.    

In a move subsequently parroted by other French rollup investors like Otium, Simago used OC extensively as M&A currency, rolling founders into an investment vehicle called Medradio. This maneuver accomplished three key objectives:

1. Lower cash outlay; 

2. Minimise outright dilution (the alternative would be to issue straight equity or ESOPs); and

3. The tie-in effect.   

One reason Beglin and Martin were able to hold onto the majority of Simago’s equity was A LOT of debt: convertible and otherwise. 

In the spring of 2021, EI helped Simago land a  €120M unitranche facility with Eurazeo. Our sources suggest that the facility was priced at 650-750 bps over the benchmark. A remarkable feat for an effectively sponsorless aggregator that was not even 2 years old at the time!   

Let’s take a closer look at Simago’s deal wizardry.  

3. Simago’s M&A playbook - and how to deliver killer returns despite ownership restrictions

To understand Simago’s M&A machine, we sampled two acquisitions, both concluded in the first active year of operation. The insights below, and elsewhere in the article, are drawn predominantly from public sources.   

Acquisition #1 closed in February 2020 - days before the Covid lockdown. Located in an outer suburb of Paris and attached to a private hospital, Brossolette was generating between €2.5M and €3M in revenue. Simago paid €4.4M: three-quarters in cash and one-quarter in OC. 

In October 2020, Simago took over Radix - a 26 year old radiology practice in the South of France. Enterprise value was approx. €3M: a good deal for a business that went on to generate over €1M in net income in 2022 and €720K in 2023. The purchase price was satisfied entirely in OC.   

Like the 1980s yuppies moving into a gentrifying neighborhood, Simago et al were paying WAY over the prevailing market prices. To quote an investment banker, “Historically, a retiring radiologist sold his shares for around €300,000 to a young, junior doctor. With current structures, it is possible to see a non-physician investor pay 10 times more".  

We have also been told that post-acquisition Simago implements a profit-sharing mechanism: radiologists effectively retain c.70% of net profit at the centre level; they value only the c.30% they acquire. Most radiologists also reinvest in Simago, so their combined take (centre profits + Simago stake) remain well above 80% - a key reason why the model resonated with doctors and why Simago has been able to outpace their competitors.

At this point, are you curious how radiology rollups in France make money given the ownership restrictions?

We've got the answer. 

Simago and its competitors make a big deal of being “minority” investors. Legally they may be… but in practice, they still reap a significant financial benefit. We learned that there are 3 main workarounds:

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