Flight to safety: Francisco’s QGenda scores massive valuation, resilient healthcare assets selectively return to market

Kinderhook makes two acquisitions and creates a platform called Avita.

It’s Thursday.

I just finished an intense eight-day cleanse and three days of juice fasting. I’m feeling healthy and accomplished, but also, looking forward to that cup of coffee, that after work drink, and that burger… The things you do in quarantine.

This week sparked more evidence that select processes are making a comeback across verticals that have shown resilience through the downturn.

WCAS’s InnovAge, after resuming its process, is now in its late stages. InnovAge is the country’s largest provider of the Program of All-inclusive Care for the Elderly. Last week I wrote that the auction had restarted for Linden’s ProPharma, which provides compliance-related consulting services to the life sciences industry.

Flight to quality
Speaking to investors’ pent up demand to put money to work for high quality companies, this week produced a transaction that concluded one of few processes – for an asset that was neither opportunistic nor distressed – to formally kick off in the middle of the pandemic.

The secretive ICONIQ Capital, known for its ties to tech billionaires including Facebook CEO Mark Zuckerburg, joined Francisco Partners as an investor in QGenda, I wrote. The deal valued QGenda, a workforce management company focused in healthcare, at $1.05 billion, sources familiar with the matter told me. Check out my story for more detail.

The new funding puts QGenda on a good trajectory to be an IPO candidate down the road, one person close to the situation told me.

Either way, I’m guessing some virtual celebrations took place this week. QGenda’s valuation represents a massive outcome and deal multiple, I’m told, which goes against the theory that many have floated in recent months: the best companies aren’t going to sell right now because they’ll trade at a major discount.

In other words, sources have said many attractive businesses are still sitting on the sidelines, waiting for more visibility around the overall impact of covid-19. Some still hold the belief that even for companies insulated from the downturn, it’s still not a great environment to go into, one banker told me this week.
What’s your motivating factor to head back to market in a world of uncertainty? Hit me up at springle@buyoutsinsider.com

If you look at QGenda, ProPharma and InnovAge, they all have one thing in common. None are a physician practice management company or retail healthcare provider.

Such businesses are dealing with so many problems right now, even if they are surviving through the crisis. And so arguably, healthcare IT (QGenda); pharma outsourcing services (ProPharma); and a capitated, risk-based model with senior patients living in-home (InnovAge) — all may look like even better places to park your $$ right now.

To be fair, some strong performing assets of significant scale may simply be waiting for the leveraged loan market to get back to functioning normally, I’m told.

Top Scoops
Buy and build: No major deal announcements this week, but we saw some add-ons. Kinderhook snapped up two companies and will combine them with recently acquired Long’s and PharMedQuest, creating a platform called Avita. Kinderhook bought Long’s late last year in a $390 million deal, I wrote. Check out our brief.

Claiming MAC: I just wrapped up a deep dive looking at MAEs/MACs. Sponsors are spending more time testing out another strategy as a means to scrap or renegotiate a deal. That is, the interim operating covenant.

We’ve already seen a handful of disputes arise since covid-19 hit, but nothing in healthcare. Anything interesting going on I should know about?

As always, write to me at springle@buyoutsinsider.com with any thoughts, tips or feedback.