October 1, 2005

PACESETTER: Healthy Returns

When Miguel “Mike” Fernandez, 53, set out to raise capital for his new private equity fund, MBF Healthcare Partners, so much money poured in that he ended up declining $67 million from would-be investors.

Mike Fernandez, 53
Chairman and Founder: MBF Healthcare Partners, Coral Gables
Born: In Cuba. Grew up in New York City
Resume: Built and sold 12 companies
Education: Humble that he “never made it through college” and making sure his kids do.
Philanthropy: The Fernandez Family Foundation
Getaway: Home in Park City, Utah. Loves hiking around Utah mountains

Management tips: “Encourage mistakes. Just do it, and then fix it. I have yet to start a business that ended with what I thought it would be.” With employees: “Hire them, give them direction and an end goal and then give them leeway.”Witty and gregarious, Fernandez has demonstrated a Midas touch. In 2002, he sold Physicians Healthcare Plans to Amerigroup Corp. for $181 million, having built it over a decade from a $2-million investment. Barely three years later, he sold CarePlus Health Plans and its medical centers to Humana, reaping well over $300 million in profit from the Medicare HMO he’d acquired just 2.5 years earlier.

All told, he says, his ventures in healthcare over the past 25 years have generated more than $1 billion in returns for Fernandez and his children, who typically are partners in his businesses.

For MBF Healthcare, Fernandez garnered an initial war chest of about $200 million. Unlike most fund managers whose share of the pie is minuscule, he anted up $175 million in family money for the new fund and took in just $25 million from friends. He figures on leveraging that pool of money to $1 billion with debt.

He’s on the prowl for businesses in the healthcare space with an enterprise value under $100 million, strong management and sustained earnings for three or more years of $5 million or better.

After scouring some 62 deals, he has zeroed in on two so far: The first is a physician-led business that helps hospitals ensure they get paid by managed-care outfits. A second is a wholesaler in the home-health and infusion business.

“What you buy in any business is the management,” says Fernandez. “Bet on the jockey, not the horse.”