Beecken Petty and Heritage explore sale of Medical Solutions

The healthcare-staffing universe has benefited from positive growth trends over the past few years as the total insured market expanded under the Affordable Care Act.

Despite uncertainty around future healthcare reform, the continued nursing shortage is likely to bode well for folks like Beecken Petty O’Keefe & Co. and Heritage Group. 

The pair of investors are said to be mulling a potential sale of Medical Solutions, the fast-growing travel nurse staffing agency they recapitalized less than two years ago, according to three sources.

Whether a process for the Omaha company has been launched is uncertain, but Jefferies has been retained to advise, one of the sources said. A spokesperson for Jefferies declined to comment.

Medical Solutions specializes in placing registered nurses in temporary travel assignments nationwide, encompassing contracts with more than 2,000 U.S. hospitals.

The company generated 2015 revenue of $217 million, having grown its top line by 262 percent over a three-year period, the company said in a report for the 2016 Inc. 5000 list. Annual revenue currently sits closer to the $300 million mark, said a fourth source.

Margins wider than 8 percent

The company likely generates EBITDA margins wider than 8 percent, one of the sources said, suggesting the company’s EBITDA is above $24 million. The asset ought to command significant buyer interest and a double-digit multiple of EBITDA, another source said. This suggests a sale would likely produce a deal valued beyond $240 million.

The sale of Medical Solutions would mean a relatively short investment hold for its current backers. It was only in September 2015 that Chicago PE group Beecken Petty and Nashville venture capital firm Heritage completed their recap of Medical Solutions, marking an exit for previous sponsors McCarthy Capital and Tenex Capital. Terms weren’t disclosed.

Trade publication Staffing Industry Analysts anticipates growth in the U.S. healthcare staffing market will slow to 6 percent in 2017 from 13 percent in 2016, as the spike in healthcare hiring driven by the ACA, or Obamacare, reaches its final innings.

Among the most sizable PE-backed healthcare-staffing companies is CHG Healthcare Services, which Leonard Green took control of in a November 2012 secondary buyout from J.W. Childs. Ares Partners co-invested in the transaction.

While financial terms of the CHG deal weren’t disclosed, Reuters had reported that the sellers aimed to fetch about 11 times EBITDA to produce a $1-billion-plus transaction.

Return to the market?

J.W. Childs’s sales process for CHG, a provider of temporary and permanent physician staffing, commanded significant buyer interest, one of the sources said, adding that Leonard Green will likely bring the company back to market in the near future.

Recent PE plays in the healthcare-staffing universe include BelHealth’s deal for American HealthCare Services Association, completed in February, the same month Vistria Group announced its acquisition of Supplemental Healthcare. Harren Equity Partners in December completed its recap of Management Health Systems.

Sellers include Gridiron Capital, which in January announced the sale of travel nursing agency Trinity Healthcare Staffing Group to Travel Nurse Across America.

Representatives of Beecken Petty, Heritage Group, Leonard Green and Jefferies didn’t respond to requests for comment, while a Medical Solutions spokeswoman declined to comment.

Action Item: Reach Heritage Group Managing Director Rock Morphis at +1 615-263-7850

A nurse walks in a corridor at Pellegrin Hospital in Bordeaux, France, on Nov. 23, 2016. Photo courtesy Reuters/Regis Duvignau