Case Study: Harvard Drug Group

Business

Harvard Drug Group (“Harvard”) is the largest independent-focused distributor of generic drugs in the U.S.
Harvard generates annual sales of over $450 million and serves 42,000 customers, comprised of independent, regional, and national pharmacies, hospitals, long-term-care facilities, medical offices, veterinary offices, and government clients.
Harvard’s manufactured products line, Major, is one of the largest lines (measured by number of SKUs) of generic products under one label in the industry.
Harvard’s Letco/Spectrum division is a leading distributor of products to the Compounding Pharmacy market in the U.S.
Harvard’s IDS division is an industry pioneer in the independent diagnostic testing laboratory market for in-home studies in the U.S., where it controls a significant portion of the oximetry testing market, and is the first mover in the home sleep apnea testing market.

Investment Thesis

Harvard operated in a high-growth, and fragmented market.
Significant organic growth potential due to increasing penetration of generic drugs and branded pharmaceutical patent expiry.
Opportunities to grow through geographic expansion as well as the identification of high margin complimentary businesses (e.g. veterinary supply).
Cost savings opportunity from scale and rationalized logistics.

Key Operational Activities

Spearheaded eleven add-on acquisitions to place Harvard in new, high growth and high margin geographies and market segments.
Invested significant capital in infrastructure development (e.g. logistics and business systems).
Emphasis on Human Resource Management - recruited exceptional leadership team and Board of Directors.
Created an organizational culture that placed a premium on customer service.
Led two sale processes to private equity investment firms.

Investment Results

For the past fifteen years the Company has led its peer group in return on equity and has produced twelve consecutive years of EBITDA growth.
In December 2006, HIG acquired a majority of Harvard’s equity in a leveraged buy-out transaction. Randy Friedman continued as Chairman and CEO following the HIG acquisition.
In April 2010, Court Square Capital Partners acquired Harvard in a transaction that generated significant cash proceeds to the equity holders.