Primus Capital is looking to exit its nearly decade-long investment in MedHost, the provider of healthcare information management systems and patient engagement services, four sources familiar with the matter told Buyouts.
William Blair scored the mandate to advise on a process for the Franklin, Tennessee, company, three of the sources said.
MedHost generates EBITDA in the low-to mid-$40 million range, two of the sources said. The process could produce a multiple of EBITDA from 8x to 12x depending on the interest commanded, sources said.
The valuation will largely depend on whether a strategic buyer participates in the process alongside private equity, they said. A PE firm could also buy Medhost and combine it with a revenue-cycle-management provider, one source suggested.
Led by Chairman and CEO Bill Anderson, Medhost provides clinical and financial services that help hospitals and healthcare systems run more efficiently.
Medhost develops enterprise electronic health record, or EHR, systems, offers population health management services and offers a web-based patient engagement service, YourCareEverywhere, among other things. The company’s services are used in more than 1,100 healthcare facilities nationwide.
On one hand, Medhost’s scale and installed customer base are likely to appeal to suitors, given the scarcity of available healthcare IT assets of size, sources said. On the other hand, the company has struggled to grow and the acute-care EHR market faces headwinds, including the prospect that the Trump administration could loosen reporting requirements, they said.
The most logical strategic buyer for MedHost would be publicly traded athenahealth, based on its continued desire to push into the acute-care EHR market for hospitals, sources said. Whether it pulls the trigger is largely uncertain, sources said. One source described a sale to athenahealth as the best outcome for Medhost, while another said athenahealth was unlikely to look seriously at the asset.
“Our business-development team is constantly on the lookout for industry partnerships that can advance our market footprint and accelerate our platform and services strategy,” an athenahealth spokeswoman wrote in an email to Buyouts.
Athenahealth is facing pressure from Paul Singer’s activist firm Elliott Management. The billionaire’s hedge fund earlier this year reported a 9.2 percent stake in the cloud-based provider of physician billing systems, asking it to weigh strategic opportunities.
Cerner, Allscripts, CPSI (Computer Programs and Systems) and Epic Systems are among notable players with an established foothold in the acute-care hospital EHR market.
A fifth source familiar with MedHost noted that the PE-backed company retained Bank of America Merrill Lynch around 2013 to consider a potential IPO, but the company never filed to go public.
Primus has owned the healthcare technology firm for almost a decade, having recapitalized what was then Healthcare Management Systems in October 2007.
HealthTech Holdings, the parent of HMS, rebranded as Medhost in December 2013. It was in February 2010 that HMS acquired Medhost to create a combined platform expected to generate north of $100 million in revenue that year, a news release at the time said.
Managing Partner Phil Molner and Director Aaron Davis of Primus sit on the MedHost board.
Representatives of Primus, MedHost, and William Blair did not immediately return requests for comment on Wednesday.
Action Item: Reach out to Primus’s Phil Molner at email@example.com
Update: This article has been updated with comment from an athenahealth spokeswoman.
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