Carlyle Group is evaluating the sale of MedRisk, a provider of physical rehab services for the workers’ compensation industry, according to people familiar with the matter.
Centerview Partners has been retained as the lead advisor on the sell-side, while additional advice is being provided by Truist Securities, which was created through the recent merger of SunTrust Robinson Humphrey and BB&T Capital Markets.
Materials are being distributed to potential suitors with first-round bids coming up before year-end, sources said. Large buyout funds are expected to participate and there is some strategic interest, sources said.
The process, while still in the early stages, aims to produce a deal early next year.
The sell-side is marketing approximately $165 million in 2020 EBITDA and $180 million in projected 2021 EBITDA, the sources said.
Indicating a rapid pace of growth, that’s up from the approximately $85 million that sources placed EBITDA at in 2017, when Buyouts wrote that former owner TA Associates was running a sale process for the business.
That process, also conducted by Centerview, ultimately resulted in the majority sale to Carlyle, signed in December 2017.
Financial terms weren’t disclosed. However, the deal valued the business at $1.28 billion, the WSJ reported in January 2018, citing an S&P news release. According to the report, MedRisk management was expected to retain an ownership stake of about 14 percent, reducing its pre-transaction stake of 55 percent.
While still early, a sale this time around could produce a multiple of EBITDA in the high teens, sources speculated.
Headquartered in King of Prussia, Pennsylvania, MedRisk helps coordinate care and manage the claims process for injured workers receiving physical and occupational rehabilitation, chiropractic care and telerehabilitation. The company contracts with workers’ compensation insurance carriers, third-party administrators, self-insured employers, state funds and case management companies.
MedRisk is led by CEO Kenneth Martino, while Mike Ryan is chairman.
While MedRisk has continued to grow and gain market share under Carlyle, its primary competitor, One Call, has struggled.
One Call’s former PE owner Apax Partners lost control of the debt-laden business more than a year ago to avoid bankruptcy, handing over the keys to existing lenders KKR and GSO Capital Partners, the credit-focused investment arm of Blackstone. The debtholders in October 2019 led a new investment of $375 million into the company, through which One Call’s outstanding debt was reduced by $1 billion and its annual interest expense reduced by approximately $90 million.
It’s possible that whoever ends up buying MedRisk may also see a longer-term opportunity to combine the business with One Call when it’s ready to be sold and broken up, one source said, noting that the combination could lend to a lot of synergies.
One Call’s workers’ comp services extend beyond the physical therapy arena, helping coordinate care in the dental, diagnostics, equipment and devices, home health and transport areas.
Apax bought the business in 2013 from Odyssey Investment Partners, simultaneously acquiring and merging it with General Atlantic’s Align Networks – the piece that competes with MedRisk.
Carlyle, for its part, has remained active on the healthcare front through the pandemic. In North America activity, the firm in recent months struck two growth-focused healthcare investments.
In September, the firm made a strategic investment in TriNetX, a global health research network optimizing clinical research to bring new therapies to market faster. The same month, Grand Rounds, a healthcare clinical navigation business, secured a $175 million round led by Carlyle.
Carlyle, Centerview and Truist declined to comment. MedRisk didn’t return PE Hub’s request for comment.