Varsity Healthcare Partners is quickly building out a sizable mid-market player in healthcare revenue cycle management, with DuvaSawko/abeo pushing further into emergency medicine with the acquisition of Gottlieb.
Financial terms of the deal are unknown, however the acquisition brings the combined company’s EBITDA close to $45 million, a source familiar with the deal said. That’s up from $7 million in EBITDA generated by DuvaSawko when Los Angeles-based Varsity first invested in the platform in November 2019, the person said.
Including Gottlieb, the Ormond Beach, Florida-based RCM platform now processes approximately 9 million emergency medicine visits and 3.5 million anesthesia cases annually across more than 40 states.
DuvaSawko/abeo is a Fund 3 investment for Varsity. The vehicle closed on $424 million in August 2019 and is now more than 70 percent deployed, the source said.
The pace in which Varsity has grown DuvaSawko/abeo is notable; few scale mid-market RCM providers sit below industry giants like Change Healthcare, whose $13 billion sale to UnitedHealth Group is pending, R1 RCM, or nThrive. Perhaps indicative of selective renewed interest in RCM, Clearlake Capital in November bought the RCM software platform of Pamplona Capital‘s nThrive in a $1 billion-plus deal, PE Hub wrote.
For DuvaSawko/abeo, Gottlieb comes just a few months after DuvaSawko and Abeo joined forces. Abeo, purchased from Parthenon Capital in November, offers RCM and other technology solutions for independent anesthesia practices.
DuvaSawko and Gottlieb fit together logically, as the businesses compete for the same type of customers on the emergency medicine front. Gottlieb also adds offshoring capabilities that can be leveraged, plus offers practice management solutions through Praxi Physician Management.
Michael O’Boyle, DuvaSawko/abeo CEO, will continue to lead the combined company, while management of both companies will be retained and continue on as meaningful shareholders.
Varsity contributed additional equity to complete the transaction with Gottlieb, while Twin Brook Capital Partners provided financing to support the acquisition.
Varsity’s original investment in DuvaSawko originated from the firm’s investment experience in the end-market in which it plays – having invested in Emergency Care Partners in 2018, PE Hub previously wrote. The platform, now focused on anesthesia and emergency medicine providers, will ultimately consider new specialties in which can diversify – whether that’s radiology, orthopedics or home care, although nothing is imminent, the source said.
Elsewhere, the healthcare-focused private equity firm has been busy scaling other platform investments.
Varsity’s Probo Medical – a supplier of medical imaging equipment, parts and repair – has inked three acquisitions already since the start of the year: SonoDepot, IMAX Medical and Mount International United Services.
The firm also announced a new platform investment in January, closing a growth investment in Colorado Springs-based Peak Dental Services.