Golden Gate takes stake in Ensemble Health in more than $1.5 bln deal

  • Catholic health system bought Ensemble in May ’16 for up to $110 mln
  • Sell-side financial adviser: Guggenheim
  • First big healthcare-oriented tech deal for Golden Gate

Golden Gate Capital agreed to acquire a slight majority stake in Ensemble Health Partners from Bon Secours Mercy Health, assigning the revenue-cycle-management division an enterprise value between $1.5 billion and $2 billion, according to people familiar with the matter.

In connection with the transaction, Bon Secours will receive about $1.2 billion in proceeds, the people said.

The deal implies a handsome outcome for the Catholic health system, having purchased Ensemble only three years ago for $60 million up front, in addition to a $50 million earnout component.

The transaction also is the first of its kind. While other large health systems like Tenet Healthcare own RCM companies, Ensemble represents the first three-way partnership among private equity, a Catholic health system and an RCM company.

For Golden Gate, Ensemble is the San Francisco PE group’s first healthcare-focused investment. High-profile investments for the well-known investor in technology and business services have included Neustar, 2020 Technologies and Infor, the latter of which has hospitals among its various end markets.

The pending deal also concludes a Guggenheim Partners-run process that sources previously characterized as tightly run and exclusive to financial sponsors.

Consistent with expectations, Bon Secours is selling a 51 percent equity interest in Ensemble, continuing on as a significant investor.

The Cincinnati system will also remain a commercial partner of Ensemble and will maintain board representation.

Founded in 2014 by CEO Judson Ivy, Ensemble offers full outsourced RCM services to hospitals, health systems and affiliated physician practices.

The company helps customers increase the collection of payments for treatment offered to patients, with services ranging from patient access to denials management.

Ensemble employs 3,600, serves customers in 30 states and is an outsourcing partner to more than 60 hospitals. The company generated 2018 Ebitda just north of $150 million, two people previously said.

The pending transaction comes as other healthcare-services providers weigh divestitures of RCM units. These include Mednax, which in November said it planned to divest MedData.

Meanwhile, Tenet continues to explore strategic options for Conifer Health Solutions.

In other brewing RCM activity, Bain Capital recently engaged JP Morgan Securities and Deutsche Bank to weigh strategic options for industry giant WayStar.

Change Healthcare, the RCM provider owned jointly by McKesson, Blackstone and Hellman & Friedman, filed for its public debut earlier this year.

Action Item: Check out Golden Gate Capital’s latest Form ADV: