Apollo’s West Corp looks to carve out Health Advocate

  • West bought Health Advocate for $256 mln in 2014
  • Company founded 2001 by 5 former Aetna execs
  • Strategics and PE in mix for patient-advocacy company

West Corp is exploring the sale of its patient-advocacy unit, Health Advocate, less than a year after Apollo Global Management completed its take-private of the company largely known for its conference-call services, according to people familiar with the matter.

The sellers have engaged Goldman Sachs and Triple Tree for financial advice on the process, the people said.

Health Advocate, Plymouth Meeting, Pennsylvania, is projecting north of $45 million in adjusted 2018 Ebitda, some of the people said.

The process is likely to produce a deal valued at a mid- to upper-teen multiple of Ebitda, sources suggested.

The auction targets a group of strategic buyers, one source said, though another source confirmed that private equity is also in the mix.

Health Advocate could be a logical fit for strategics like Blackstone Group’s Alight Solutions benefits business, payroll-services giant ADP or Cognizant’s Trizetto, one of these people suggested.

Health Advocate offers data-driven insights to help employers and their employees navigate the health-insurance system. Employers typically offer the services as a benefit of their healthcare plans.

One person likened Health Advocate to a call-center business at its simplest level, with skilled representatives helping employees coordinate multiple healthcare providers, resolving issues relating to medical claims and benefits.

In that respect, Health Advocate can be especially helpful to individuals facing chronic conditions, the source noted.

Health Advocate has attractive Ebitda margins and a strong growth profile, while its alignment with the increasing consumerism of healthcare adds further appeal, one of the people said.

The source added that the asset’s service- versus tech-oriented nature is another factor that buyers will assess as they value the company.

Health Advocate was founded in 2001 by a group of former Aetna execs, including Chief Medical Officer and President Emeritus Abbie Leibowitz, alongside Michael Cardillo, Martin B. Rosen, David Rocchino and Thomas A. Masci. Matt Yost currently serves as president.

West Corp in May 2014 acquired Health Advocate for about $265 million excluding working-capital adjustments. The company at the time said Health Advocate generated 2013 revenue of about $86 million.

Funds managed by affiliates of Apollo in October 2017 completed the take-private transaction of Omaha-based West Corp in a deal valued at $5.2 billion.

West Corp shortly thereafter named John Shlonsky CEO after Thomas Barker retired, alongside various other changes in the C-suite.

The company has since made a number of acquisitions including Flowroute, AVOKE, Nasdaq’s Public Relations Solutions and Digital Media Services business, PhoneTree and ECaTs.

Representatives of Goldman and Apollo declined comment, while those with West, Health Advocate and Triple Tree didn’t immediately return requests for comment.

Action Item: Read more about Health Advocate’s approach: www.healthadvocate.com/site/our-approach