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Sponsors circle Ares’ OB Hospitalist

Ares Management’s sponsor-driven auction for OB Hospitalist Group is approaching its second round, people familiar with the matter told Buyouts.

Moelis & Co is conducting the sales process for the specialty hospitalist group concentrated on obstetrics/gynecology, according to three sources.

Management meetings are underway, two of the sources said. First-round bids came primarily from sponsors, though a small number of strategic buyers also took part, one person said. The strategics aren’t expected to advance, this person said.

The auction is expected to be reasonably competitive, the sources said, one of whom speculated a deal ought to be announced in about six weeks to two months.

And the process for the Mauldin, South Carolina, company has created significant noise around which EBITDA figure the company ought to be valued off, the sources said.

OB Hospitalist generated $30 million in EBITDA on a trailing 12-month basis, whereas adjusted pro-forma EBITDA is closer to $50 million, according to the sources.

The process will likely produce a low-double-digit multiple of EBITDA, the sources said. A fourth source familiar with the company speculated that OB Hospitalist would fetch a multiple of 12x or greater.

Recent activity in the space includes Audax Management’s March recap of Women’s Healthcare Group of PA, which is now called Axia Women’s Health. The transaction commanded a 14x multiple of EBITDA, a PE source familiar with the matter said.

While the large physician-staffing giants like Envision Healthcare and Mednax are unlikely to make a play for OB Hospitalist, the segment is garnering significant PE interest, sources said.

Among other things, the field presents significant opportunities for OB providers amid a continued shift to a bundled payment reimbursement model, one of the sources said. In other words, it’s a business unlikely to see substantial reimbursement pressure.

Founded in 2006, OB Hospitalist develops and manages personalized 24/7 onsite obstetrics hospitalist programs to hospitals in the U.S. Its network encompasses more than 500 OB hospitalists serving more than 100 active and onboarding partner hospitals across 27 states.

Ares invested in OB Hospitalist in October 2013.  Summit Partners previously backed the company.

The Wall Street Journal initially reported that the PE-backed company had retained advisers to explore a sale.

Ares also owns Boca Raton, Florida’s, Unified Physician Management, which says it is the largest provider of practice-management services to OB/GYNs. Services offered include managed-care contracting, billing and collection services as well as electronic-health-record and human-resources services.

Representatives of Ares and OB Hospitalist did not immediately return requests for comment. A Moelis spokesperson declined comment.

Action Item: Key PE contacts at Ares:

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