FFL takes home Autism Learning Partners in $270 mln-plus deal

  • Selling shareholders: Jefferson River Capital, Scopia Capital Management & Great Point Partners
  • ALP to generate >$16 mln in 2017 adj. Ebitda
  • Sources: Summit-CARD deal never closed

The highly anticipated auction for Autism Learning Partners has concluded, commanding north of $270 million through a sale to FFL Partners. The transaction represents the vertical’s largest-ever sponsor deal, according to sources familiar with the situation.

The sellers include Jefferson River Capital, the family office of Blackstone President and COO Tony James, and Scopia Capital Management, which prior to the sale owned a combined interest of about 70 percent, two sources said. The stake of ALP’s earliest investor, Great Point Partners, stood at close to 20 percent prior to the deal, they said.

The transaction, valued between $270 million and $280 million, follows what was said to be a robust sales process conducted by Berkery Noyes & Co, as previously reported by Buyouts. The auction kicked off in mid-2017, producing around 20 indications of interest in its early stages, one of the sources said.

ALP, Glendale, California, provides applied behavioral analysis services to children with autism-spectrum disorder and other developmental disabilities. The company expects adjusted EBITDA in the $16 million to $17 million range in 2017, up from the high single-digits in 2016 and low single-digits in 2015, one of the sources said.

ALP’s rapid growth in profitability reflects what some sources described as a turnaround story.

Great Point’s investment in ALP dates to 2010, making the firm one of the first to make a bet in the space. But according to several sources, the asset faced significant challenges, and it wasn’t until 2013, when Scopia became a minority investor and helped fund an add-on deal, that the tide began to turn.

Scopia Capital, a hedge fund whose PE arm at the time was led by David Wittels and Michael Somma, became ALP’s majority owner in early 2015 after injecting additional capital in the company to bolster operations, two of the sources said.

It was around that time that a new management team was recruited, including President and CEO Jeffrey Winter and COO Gina Chang, who sources said played key roles in driving a new trajectory at ALP.

Winter, who prior to ALP led the hospital division of Kindred Healthcare, will continue to lead the company alongside Chang and other members of management. The management team will also roll over a minority investment.

In mid-2016 Wittels and Somma left Scopia to head investment efforts at newly launched Jefferson River, though they continued to manage ALP on Scopia’s behalf as well, two of the sources said. Jefferson has funded the company’s latest add-on deals, including its September add-on of Aspire Autism.

Importantly, FFL’s play for ALP represents the largest PE deal to date in autism treatment, an area that is considered to have tremendous runway for growth and further consolidation.

Summit Partners came close to acquiring the even larger CARD, or Center for Autism & Related Disorders, in December 2016, but according to three of the sources, the transaction never closed.

Still, talk of a Summit-CARD partnership is said to have helped validate the investment thesis in the vertical. Fueled by underlying drivers including increasing awareness of the problem, autism treatment has since seen considerable interest from the private equity community, but the deals have been much smaller.

To name some of them, MTS Health Investors in March recapped Trumpet Behavioral; Jordan Co in May invested in Invo while LLR Partners scooped up Learn It Systems; Shore Capital in June recapped Behavioral Innovations and Baird Capital in November backed Hopebridge.

For FFL, the deal comes on the heels of another deal in behavioral health. The middle-market PE group in October teamed up with Lee Equity Partners to buy Flexpoint Ford’s Summit Behavioral Health, a provider of addiction treatment services.

Representatives of Jefferson, Scopia, Great Point and Berkery Noyes declined to comment. A representative of Summit didn’t immediately return a request for comment

Action Item: Check out FFL’s portfolio: www.fflpartners.com/portfolio

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