Former Bush official’s firm finds exit for one of its last companies in New Mountain deal

  • Newly merged company expects >$80 mln EBITDA in 2018
  • Deal came together after formal Goldman auction
  • Companies collect patient data used by private health plans to bill Medicare

Through a pair of simultaneous deals, New Mountain Capital has created a means for Health Evolution Partners to liquidate one of its last remaining investments, CenseoHealth.

New Mountain is buying majority stakes in both CenseoHealth and Summit Partners-backed Advance Health. In merging the pair, the New York buyout firm will create the largest provider of in-home health risk assessments to seniors with Medicare Advantage health insurance plans.

Terms weren’t disclosed, but the combined company accounts for adjusted 2017 EBITDA close to $70 million, while EBITDA for 2018 is projected to surpass $80 million, sources said. Moodys Investors Service projected the new entity would approach 2018 revenue of $275 million.

The transactions come after Health Evolution Partners’ formal sales process for CenseoHealth failed to secure a buyer due to high price expectations, one of the sources said.

Buyouts initially reported in May that the healthcare fund run by a former George W. Bush administration official had hired Goldman Sachs to run a sales process for Dallas-based CenseoHealth. A process conducted a couple years earlier had also concluded without a transaction, sources said at the time.

After the latest sponsor-focused auction was shelved, New Mountain proactively approached Summit’s Advance Health, which gave the firm a strategic angle to revisit CenseoHealth and effectively acquire both, the source said. By that time, CenseoHealth’s price expectations had come down, the source said.

Advance Health’s former backers also included HarbourVest Partners and Noro-Moseley Partners.

The combination helps mitigate customer concentration and regulatory risks. That’s partly because it creates a better opportunity to diversify beyond health risk assessments into care-management services that focus on chronic care of patients reliant on all insurance plan types, Moody’s noted. Advance Health already offers some ancillary services.

The newly combined company also surpasses Matrix Medical in size, which until now was the largest provider in the sector. These companies have networks of doctors that visit seniors at home and collect data on their health. That data is ultimately used by private health plans to bill Medicare.

Frazier Healthcare Partners bought a 60 percent equity interest in Providence Service Corp’s Matrix in an October 2016 deal that valued the company at about $538 million. Providence bought Matrix from Welsh, Carson, Anderson & Stowe two years earlier for $400 million.

Following Matrix’s first trade, Health Evolution Partners had hoped to unload CenseoHealth, a source previously told Buyouts.

New Mountain is funding the acquisitions with proceeds from a newly proposed $260 million first-lien term loan as well as a substantial equity contribution, Moody’s said. The merged company has leverage of about 4.5x on an adjusted debt-to-EBITDA basis.

Perhaps indicative of an emerging tactic by New Mountain, this marks the second instance in which the New York buyout firm has simultaneously merged and recapitalized two companies.

New Mountain in December 2015 bought Great Point PartnersEquian and merged it with Abry PartnersTrover Solutions to create a combined platform offering cost containment services to the healthcare and property and casualty insurance industries.

Health Evolution Partners, for its part, lost its only limited partner in 2014 when California Public Employees’ Retirement System chose to end the relationship.

HarbourVest around the end of 2014 bought CalPERS’s stake in the growth fund in a deal representing about $400 million of net asset value, a source told Buyouts at the time. Sources said then that Health Evolution Partners was not winding down and had plans to raise a new fund, though that has yet to happen.

After CenseoHealth, Health Evolution Partners’ only remaining investment is Prolacta Bioscience, which makes milk-based nutritional products.

The firm is headed up by led by former George W. Bush administration official David Brailer.

TripleTree advised Advance Health, while New Mountain received banking advice from Deutsche Bank.

Action Item: Check out the rest of NMC’s current portfolio: http://www.newmountaincapital.com/new-mountain-private-equity/portfolio-companies/

Photo courtesy of KatarzynaBialasiewicz/iStock/Getty Images