Sun Capital buys Miami Beach Medical Group in $500m-plus deal

Sun Capital backs the second-largest primary care group serving the Medicare Advantage senior population in South Florida, underscoring the firm's continued push into growth-oriented healthcare investing.

Sun Capital Partners is the latest sponsor getting into the business of value-based primary care, agreeing to acquire Miami Beach Medical Group, the Boca Raton, Florida, firm told PE Hub

The transaction provides an exit for Gauge Capital, a Dallas mid-market firm that made a majority investment in MBMG in January 2017. 

While Sun Capital declined to comment on terms of the transaction, sources with knowledge of the matter said the sale commanded a valuation in the mid-$500 million range. PE Hub originally wrote in October that MBMG, in the late stages of a sponsor-focused sale process, marketed EBITDA of approximately $40 million. 

Oppenheimer provided sell-side financial advice on the deal, while KKR’s credit platform provided financing on the transaction. 

Founded in 1997, Doral, Florida’s MBMG has grown to become the second-largest primary care group serving the Medicare Advantage senior population in South Florida. 

In addition to its 19 centers across Florida, the company has contracted relationships with 10 health plans and operates a management services organization with 74 independent physicians serving more than 1,750 Medicare Advantage patients. 

MBMG’s capitated, risk-bearing model of reimbursement – versus the traditional fee-for-service payments – paired with a growing senior population and Medicare Advantage market, fueled PE interest in the business, sources told PE Hub

“Everyone would agree this is just a better way to do healthcare,” said Dan Florian, who led the firm’s investment in MBMG alongside principal Stephen Cella, with support of the Sun Capital co-CEOS and investment committee.

“On one end, you’re saving the government [payers] money and on the other end you’re keeping patients healthier,” the managing director continued, adding that doctors are also incentivized to keep patients healthy. “That’s the keystone of this investment.” 

The growth opportunity ahead is vast, as Florida today is the second-largest Medicare Advantage market by enrollment in the country. There is significant opportunity to grow by filling out regions within Florida and converting existing Medicare patients to MBMG’s Medicare Advantage plan. “We think we can stay in Florida and still meet all our objectives,” although growth beyond Florida is not out of the question, Florian said. 

For Sun Capital, the deal underscores the firm’s continued push into growth-oriented healthcare investing. 

With existing investments in consumer facing healthcare segments including dermatology and dental – via West Dermatology and Simply Beautiful Smiles, respectively – MBMG extends its portfolio into a more complex vertical of healthcare.  

Further, the private equity shop has been busy as of late, with MBMG coming on the heels of Sun Capital’s sale of ClearChoice Management Services – its first investment since launching a new and reformed healthcare initiative in the 2015-16 time-frame. 

PE Hub wrote earlier this week that ClearChoice was purchased by private equity-backed dental support giant Aspen Dental Management Inc. at a more than $1.1 billion valuation – more than double the dental implant services provider’s value three years earlier. 

Primary care heats up

Broadly speaking, the primary care universe in which MBMG plays has emerged as an increasingly hot area of investment this year – with some sources characterizing the last month or two as “an inflection point” in the segment. 

On Tuesday, Arsenal Capital Partners announced that it has acquired Best Value Healthcare in partnership with its founders, which sources said preempted a Guggenheim-run process. The primary care platform focuses on Medicare Advantage and operates in Central and South Florida. Macquarie Capital advised Arsenal on the deal, an announcement said. 

In other activity, Cano Health shocked the private equity community last week when it unveiled a  $4.4 billion merger with Jaws Acquisition Corp., a SPAC sponsored by real estate investor Barry Sternlicht.

Backed by InTandem Capital Partners, the primary care provider just a few weeks earlier had received final round bids from a narrow group of parties including large buyout funds and pension funds, PE Hub wrote. A private equity outcome was anticipated to produce a deal valued between $1 billion to $2 billion – significantly below Cano’s ultimate outcome.