Everyone wants in on the HCIT party: TA, Francisco Partners, Blackstone, Oak HC/FT; Bain-backed Cerevel joins the SPAC craze

PE appetite for healthcare technology continues unabated.

It’s Thursday, healthcare fanatics.

While my quarantine sabbatical from our Madison Ave office carries on out West, this week yet again proved that private equity’s appetite for healthcare technology hasn’t skipped a beat.

Healthcare, tech and premium valuations
On the heels of big valuations commanded by WellSky and QGenda, more activity wowed the market in HCIT in recent days. Assets of all colors and shapes are generating huge pricetags and the backing of prominent investors. Private equity wants to transact.

“It’s truly remarkable. What pandemic?” one source commented.

One of those involved a highly complex deal structure for Edifecs, which scored a joint investment from Francisco Partners and TA Associates. The two firms are set to own a combined 51 percent stake in the electronic data interchange (EDI) company.

Perhaps the most uncommon aspect of the deal: an earnout component tied to a metric I’ve only seen once before – the multiple of invested capital generated by the investing PE firms. (Remember when American Securities’ NAPA purchased the anesthesia business from Mednax a few months ago?)

Check out my story for financial detail and more.

Edifecs reiterates something that Eva Davis, the co-chair of Winston & Strawn’s Private Equity Practice, told me a few months ago: “There are no market norms right now. The market’s out the window and you’re creating your own market real-time in terms of reps, warranties, structure and purchase price. And the main focus is on those earnouts.”

In other HCIT action… I caught up with the CEO of HealthEdge, the Blackstone-backed software company, to dig into its deal for a longtime M&A target, The Burgess Group. Unlike Edifecs, which acts as the data movement engine that cuts across from the insurance company to the outside world (healthcare providers, clearinghouses and other insurers), HealthEdge solves a totally different problem. The company sits inside of insurance companies, configuring health plans and adjudicating the claims that come out of it. Now, HealthEdge has expanded into payment integrity. Read more.

Top Scoops
Growth equity: Another Blackstone-backed company made noise this week.

Sema4, a digital healthcare spinout from Mt. Sinai Health System, surpassed a $1 billion valuation this week following a $121 million funding round led by BlackRock. Besides Blackstone, other existing investors that participated in the latest financing included Oak HC/FT. Read more.

I caught up with Oak’s Andrew Adams the other day on the heels of its funding in a CDMO newly rebranded as August Bioservices. Outside of the new investment, Adams told me the success of newly public companies like One Medical, a portfolio company up until recently, only adds to public interest in digital health and the growth playbook in which it specializes.

“I think we have a number of IPO candidates,” Adams said. Read more.

SPAC: If it wasn’t already the talk of the town… Bain Capital-backed Cerevel Therapeutics this morning said it would merge with Arya Sciences Acquisition Corp II, a blank-check company sponsored by Perceptive Advisors. The neuroscience drug development company is set to raise $445 million, with the combined company expected to have an initial market capitalization of approximately $1.3 billion. Stay tuned for more coverage.

That’s it for me. As always, reach me at springle@buyoutsinsider.com with your tips, feedback, or just to say hello.