Farmafactoring

Farmafactoring S.p.A. is the leading provider of credit management services to suppliers to the Italian public healthcare system, the Servizio Sanitario Nazionale (’SSN’).

The company was founded in 1985 by a group of Italian and multinational pharmaceutical and biomedical companies to alleviate the cash-flow difficulties of the SSN’s suppliers, who were affected by the traditionally long payment cycles of its constituent health authorities.

Farmafactoring purchases and manages the collection of its clients’ receivables, allowing them to completely outsource their accounts receivables management function. In addition to providing non-recourse factoring, Farmafactoring also provides receivables management services for clients who choose to retain them on their own balance sheets.

Farmafactoring’s strong relationships with the SSN’s local health authorities across Italy and deep knowledge of their payment patterns allows the company to price its products very competitively, while its scale gives it a strong bargaining position when negotiating payments from the health authorities.

The company was attractive to Apax Partners as it is the clear market leader with a defensible competitive position in a growing sector. Historically, growth in public healthcare expenditure has not been impacted by the economic cycle and, in addition, the company has identified several growth opportunities, including providing its services to a wider range of suppliers to the SSN and to other parts of the Italian public sector, launching new products to its existing clients, and expanding internationally.

In December 2006, the Apax Europe VI fund won an auction to acquire a 91.7% stake in Farmafactoring. The Apax deal team had been developing an understanding of Farmafactoring’s business and prospects for some time prior to the decision by the company’s shareholders to begin the sale process, and their extensive knowledge of the business provided a key competitive advantage during the auction process.

Since the acquisition, the business has continued to perform strongly and the Apax deal team has worked with the company’s management to put in place preemptive measures to counter any shocks resulting from the volatility of the credit markets.

In addition, a series of initiatives has been launched to optimise the key value drivers of the business, including targets to encourage the collection of as much default interest as possible from the existing book of business, buying portfolios of receivables outside the existing client base, and improvements to the funding structure of the business.

Finally, the company has completed the necessary groundwork to expand its operations to Spain to leverage its expertise with public healthcare payers in a market with similar dynamics to Italy.