M*Modal, medical transcription business, seeks buyer

  • Company emerged from Ch. 11 in Aug. ’14
  • Previous owner OEP took M*Modal private in ’12 for $1.1 bln
  • Scott MacKenzie, former Passport Health chief, holds CEO post

M*Modal, whose voice-recognition technology helps doctors document and process patient data, is seeking a buyer, four sources told Buyouts.

About four years after emerging from from Chapter 11 bankruptcy, the Franklin, Tennessee, medical transcription company has engaged Triple Tree to explore a sale, the sources said.

M*Modal is being marketed off of an Ebitda figure of $80 million, two of the sources said.

First round bids were submitted earlier this week in the $1 billion to $1.2 billion range, according to the other two sources.

The most likely outcome is a sale to another sponsor who can revitalize cash flow, sources said, though the asset could make sense for a limited group of strategics.

The process comes after M*Modal said in a February announcement that its largest investors had completed a $70 million debt-to-equity transaction. Investors were not named.

M*Modal filed for Chapter 11 bankruptcy in March 2014, less than two years after One Equity Partners, then an affiliate of J.P. Morgan Chase & Co, took the company private in a $1.1 billion cash deal.

The Wall Street Journal in 2014 said creditors including Brigade Capital Management, Blackstone Group’s GSO Capital Partners and Fidelity Investments were among those negotiating with the company to swap their debt for equity in the reorganized company.

While Ares Capital no longer lists M*Modal as a portfolio investment on its website, the firm remains a shareholder alongside a group of creditors, sources said.

The company’s high leverage was the primary cause for M*Modal’s financial troubles, while slowing growth in its legacy transcription business amid the adoption of electronic health records further weighed on the company, sources said.

M*Modal completed its restructuring in August 2014, and shortly thereafter industry veteran Scott MacKenzie was installed as CEO.

MacKenzie as the former chief of Passport Health Communications led the company through its 2013 acquisition by Experian, and previously served as president of McKesson’s RelayHealth Pharmacy Solutions.

M*Modal provides transcription and voice recognition software, among other technology and services, to improve the clinical documentation process for physicians.

The company says that its artificial intelligence and speech-powered technology and services serve more than 250,000 physicians across 150 electronic health record platforms and systems.

M*Modal competes with a unit of Nuance and iMedx, a portfolio company of RFE Investment Partners.

Representatives of M*Modal, Triple Tree and Ares didn’t immediately return requests for comment on Tuesday.

Action Item: Reach out to M*Modal’s Aparna Prabhakar at 267-535-7680

Update: This report was updated to include information on first round bids.