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Allocate Software, backed by Vista and Hg, fields another round of bids

Vista bought Allocate from Hg in May 2018, and three months later, Hg rejoined as an investor in the healthcare-focused provider of people management software-as-a-service.

Allocate Software, an international provider of healthcare workforce management software owned by Vista Equity Partners and Hg, is fielding another round of bids today, according to people with knowledge of the process. 

A handful of sponsors and PE-backed strategics are expected to submit offers as the process accelerates quickly. First-round bids for the Richmond, UK-headquartered company were submitted at the start of last week, the people said.

William Blair and Arma Partners, a London-based bank specializing in the digital economy, are advising on the process, they said. 

Allocate’s EBITDA lies in the £40 million ($56 million) to £50 million range, with the lower figure representative of trailing EBITDA at the end of May, and forward EBITDA approaching the latter, sources said. 

Expectations are in the neighborhood of 20x to 25x EBITDA, the people said. A deal could be valued around $1.3 billion to $1.5 billion, some of the people said (translating to the low £900 million range to up to some £1.1 billion).

Vista through Vista Foundation Fund III bought Allocate from Hg in May 2018, and three months later, Hg rejoined as an investor from Hg8 Fund. Hg initially invested in Allocate at the end of 2014 through its Mercury 1 Fund, completing a public-to-private transaction from the London Stock Exchange.

Allocate, founded in 1991, offers software that helps healthcare organizations manage their workforce more efficiently and effectively – aiming to improve care and reduce costs. Its software-as-a-service addresses everything from workforce planning and scheduling to temporary staffing, communications and HR processes.

Allocate has more than 800 customers with two million staff rostered daily across 11 countries. 

The company under private equity ownership has executed a number of acquisitions, most recently adding in October UK-based Selenity Limited, a cloud-based provider of HR and finance process management software.

In late 2018, it bought Wambiz, a provider of app-based staff engagement solutions, and 247 Time, which provides vendor management, payroll and direct engagement technology for healthcare providers. In September 2019, it added Enterprise Study Ltd, a SaaS company offering Learning Management Systems and an online training marketplace.

Sources characterized Allocate as a high-quality company and steady grower, with its recurring revenue model deemed attractive. “It’s a space that every one of the big PE firms is looking at,” one person said, referring to the broader workforce management industry. That said, Allocate has different platforms in different countries that haven’t been integrated. 

While a growing area pre-covid, those in the business of improving workforce productivity and communication could be considered even more important post-pandemic as hospitals and practice groups emphasize improved processes to reduce expenses. At the same time, better management of costs throughout the supply chain is increasingly important as more healthcare providers transition to value-based models of reimbursement. 

Allocate could make sense in combination with other quasi-strategics in this broader universe, sources said. 

Other relevant companies include Qgenda, another workforce-management software company specializing in healthcare. ICONIQ Capital, known for its ties to tech billionaires including Facebook CEO Mark Zuckerburg, last year joined Francisco Partners as an investor in QGenda in a deal valued at $1.05 billion, PE Hub wrote.

Marlin Equity Partners also backs SmartLinx Solutions, which provides workforce management tools for skilled nursing, senior living and post-acute care providers.

In other areas, Temasek’s Global Healthcare Exchange (GHX), whose supply chain management technology helps healthcare constituents analyze and manage their spending, recently scored an around $500 million investment from Warburg Pincus. Sources have long wondered if the company would make strategic acquisitions to move beyond strategic sourcing.

The governance, risk and compliance (GRC) sector is also consolidating. Clearlake Capital’s Symplr, a consolidator in the healthcare GRC sector, recently returned to market to explore its own options. The sellers, working with Evercore, Goldman Sachs and William Blair, expect to command a more-than $4bn valuation in a potential transaction, PE Hub recently wrote. 

Another notable participant in healthcare GRC consolidation is RLDatix, a portfolio company of TA Associates and Five Arrows Principal Investments. RLDatix has also been active on the M&A front. 

Vista, Hg and Arma declined to comment. William Blair and Allocate did not return requests for comment.