Novo’s investment in Availity values healthcare IT company at $1.7bn-plus

For Novo Holdings, Availity marks its largest investment to date in the healthcare IT sector, with the Principal Investments arm’s push into US healthcare investing picking up in recent months under a new team.

Novo Holdings has acquired Francisco Partners’ minority stake in Availity in a transaction valuing the health information network between $1.7 billion and $1.8 billion, according to people familiar with the deal terms. 

The transaction, both when Francisco invested four years ago, and now, with Novo joining the shareholder base, is not your everyday sponsor investment.

Availity, which supports collaboration among health plans and providers, is controlled and governed by some of the country’s largest health plans – including Anthem, Humana, Health Care Service Corporation and GuideWell – meaning decision making is of a different cadence, sources said. Francisco, with the deal, sold what was an approximately 18 percent stake to Novo, one person noted. 

The business, headquartered in Jacksonville, Florida, generates about $80 million in EBITDA, according to PE Hub sources. 

The investment follows Novo Holdings’ purchase of pharma services company AltaSciences in March – which marked the first purchase for the new team steering the Principal Investments arm’s push into US healthcare investing. Ex-Temasek investor Abhijeet Lele joined Novo in September to head US Principal Investing, while former CVC Capital healthcare investor Jonathan Levy also joined as a senior partner.

Founded in 2001, Availity started as a joint venture between Florida Blue and Humana. The company says that it helps solve the communication challenges in healthcare by creating a richer, more transparent exchange of information among health plans, providers and technology partners. Availity connects over two million providers to every health plan in the US and facilitates over 13 billion electronic transactions annually.

The investment by Novo follows a Goldman Sachs-run process producing an outcome just as intended: an equity investor to effectively replace Francisco Partners.

More parties were interested in investing in Availity through a structure that would allow more control, with the ability to leverage the company and drive growth at the platform through M&A. But PE Hub sources said that was never the playbook for Availity’s health plan owners – both at the time of Francisco Partners’ initial 2017 investment, and today. 

For that reason, Availity quickly proved a better fit for less traditional PE funds that saw an opportunity to make what is essentially a riskless bet and generate a decent return, but not the return levels required by typical buyout funds. Funds that have raised opportunistic or structured capital vehicles also looked at the opportunity, one source said. 

Novo Holdings, a Copenhagen holding and investment company, appears to fit that playbook as well. Novo manages the wealth of the Novo Nordisk Foundation, which supports the firm’s flexible long-term investment mindset – backing both private and public companies, in majority and minority positions, in equity and debt. It also has an exclusive healthcare focus on the investment side.

Although the health plans could have explored other options, Availity powers its payer-owners’ transaction flow with all of their providers, and so retaining control was preferred, one person explained: “It’s of fundamental strategic importance to the plans.”

Another person noted that certain GPs weren’t interested in backing the business above a $1.4 billion value. 

Novo, Francisco Partners and Availity declined to comment. Goldman Sachs did not return a request for comment.