How Apax turned Kepro into a double-digit organic grower

‘The acquisitions of HID, EQ Health and iMedecs were each relatively small, but they gave Kepro really specific capabilities,’ according to Apax’s Cavanna.

Buyers and sellers have been having a harder time agreeing on price given fluctuating valuations and multiples, spurred by eroding economic conditions. That was not the case when Apax Partners exited Kepro to The Carlyle Group, announced in the beginning of November.

After holding the Nashville, Tennessee-based healthcare organization for five years, Apax saw growing interest in the company.

“We felt like we’d accomplished many of the things that we set out to do,” said Andrew Cavanna, partner at Apax. “As a result of building a higher quality company, we received inbound interest. Among the parties was Carlyle and CNSI, the company they were backing. We decided to engage with them directly.”

Cavanna gave Carlyle “a lot of credit” for sticking to their guns during deal negotiations. Carlyle declined to comment on the transaction.

“They said up front: ‘We’re not going to over-lever the transaction and will fund enough equity to get this done,’ and consequently, this deal did not hinge on really robust credit markets,” he explained. “This transaction was not particularly challenging in terms of agreeing on a price. Among other things, we and they had invested a lot of time upfront. Moreover, Carlyle had acquired CNSI at the end of last year, so they are only 10 or 11 months into their hold – making them very current as to the multiples in the sector. So, when they approached us, they had a very good understanding of the market.”

With the acquisition by Carlyle, Kepro and CNSI have now merged into one company. CNSI is based in McLean, Virginia, and delivers a broad range of health information technology enterprise solutions and products to a diverse base of state and federal agencies in the United States that help clients enhance business performance, reduce costs and improve the health of individuals and communities.

Kepro was originally known as Keystone State Peer Review Organization, created decades ago as a nonprofit to promote quality healthcare services for beneficiaries of Medicare and other government programs. The Apax funds held the asset for roughly five years, after investing in 2017. Today, Kepro provides largely clinical services that enable government funded health plans, principally Medicaid and Medicare, to deliver benefits and meet professionally recognized standards of care.

The combined company will help government-sponsored healthcare agencies and payers expand healthcare access, enhance quality, improve health outcomes, and lower costs through its clinical services, provider management, health claims and encounter processing, and health analytics services.


When Apax took over the asset, Cavanna knew tailwinds would help the company grow.

“Think of Kepro as an extension of the Medicaid office, providing nurses and other capabilities to help the state fulfill the Medicaid benefit,” he explained. “Medicaid has expanded dramatically over the last couple of decades, in terms of the number of people receiving coverage, the needs and complexities of the underlying member populations, and the services required to fulfill the benefits.”

He added that in light of the growth in the Medicaid sector, the thesis inside of Apax was that this would be an area where there will be increasing demand for services.

“Many government entities are looking to outsource some of the required services because they’re having challenges staffing, managing and delivering,” said Cavanna. “As such, it is a strong option to partner with companies like Kepro to help fulfill some of the components of Medicaid benefit.”

He noted that there are very few companies that are expert at addressing these populations and providing services to government programs, and the sector was known for its many mom-and-pop stores and not-for-profits.

“In light of this limited competitive set, Apax’s thesis was to create an industry leader, by using capital to invest in new capabilities and by recruiting in new talent to grow organically.”

And over five years, in addition to executing on a strategic M&A program, Apax upgraded most of Kepro’s C-suite.

“We brought in Dr Susan Weaver, who I had worked with eight years before,” he explained. “She is a clinician and understands the business and the mission that Medicaid is trying to deliver. From Dr Weaver on down, we added talented executives, including a new CFO, chief legal officer, head of compliance, head of sales, head of product and chief people officer.”

Weaver recently served as CEO for C3HealthcareRx, an innovative company providing in-home medication management and personalized pharmacy service. Previously, she was chief medical officer for Blue Cross Blue Shield of North Carolina.

An independent board was also established, including the former New York State Medicaid director Jason Helgerson, former deputy director at Centers for Medicare & Medicaid Services, Penny Thompson.

“We were aiming to create a constellation of board members that understood the customers’ needs,” said Cavanna. “One stat that I am most proud of is Kepro’s NPS score. During the funds’ hold period this important metric increased from 30 percent to 74 percent.”

During the hold period, Kepro completed three add-on acquisitions.

“The company went from not being a grower to a double digit organic grower,” he said. “The acquisitions of HID, EQ Health and iMedecs were each relatively small, but they gave Kepro really specific capabilities. The add-ons weren’t just to buy earnings; rather, they gave Kepro capabilities that could then be marketed across what is a very broad customer base.”