THL snaps up Francisco Partners’ Nextech for more than $500 mln

  • Sell-side adviser: Aeris Partners
  • Initial sales process shelved in November
  • THL participated in 2018 auction

Francisco PartnersNextech has locked down a suitor in Thomas H. Lee Partners in a deal commanding an enterprise value north of $500 million, Buyouts has learned.

Nextech officially announced the sale on June 26, following Buyouts’ report on June 19. But the company did not disclose the terms of the deal.

The company, based in Tampa, Florida, provides electronic medical record and practice management software to specialty physician groups.

THL is buying Nextech after deal discussions with another buyer fell through, sources said. Nextech had a buyer lined up following an Aeris Partners-run auction, but the process was called off around November, they said.

Rather than doubling back to other contenders in the initial process, Francisco Partners chose to make Nextech a meaningfully bigger company and scooped up Thoma Bravo’s SRS Health Software in January.

The deal expanded Nextech’s specialty-centric EMR services beyond ophthalmology, plastic surgery and dermatology, adding the orthopedic-specialty to its umbrella of offerings.

“Nextech is well-positioned to expand its market position with a growing suite of cloud products across a broad set of specialties, and we look forward to investing in this organization to accelerate growth alongside an outstanding executive team,” THL Managing Director Laura Grattan said in a prepared statement.

One source said the combined companies’ Ebitda is in the low-$30 million range, up from the low-$20 million range when Nextech was marketed a year earlier.

Meaningfully bigger, Nextech planned to return to market in the second half of 2019 after the companies were fully integrated. However THL — having participated in the previous process — remained persistent in its pursuit of the company and launched an attractive offer that ultimately led to a transaction, the source said.

The sale marks the end of a close to six-year hold for Francisco Partners. The San Francisco firm invested in Nextech in October 2013 through its third fund, which collected $2 billion in February 2011.

Francisco initially launched a sales process for Nextech in late May or early June, Buyouts previously reported.

The sellers hoped to produce a deal valued off of an upper-teens multiple of Ebitda, similar to what another asset in the space, Net Health, commanded in its recent sale, sources said at the time.

Spectrum Equity in January 2018 concluded its Aeris-run sales process for Net Health via a sale to Carlyle Group. The latter purchased the software provider through its U.S. Equity Opportunity Fund. Net Health concentrates on the urgent care, wound care, employee health, occupational medicine and physical therapy markets.

Other sponsors that have made notable plays in the specialty EMR segment include Warburg Pincus, which in May 2017 injected $231 million in Modernizing Medicine. The Boca Raton, Florida-based company serves a broad range of specialties, including dermatology, gastroenterology, ophthalmology, orthopedics, ambulatory surgery centers and pain management.

Elsewhere, Chicago’s Waud Capital Partners in July 2017 bought chiropractic-focused EMR provider ChiroTouch from K1.

Action Item: THL Managing Director Laura Grattan can be reached at 617-227-1050.

Note: This story was updated with additional information on June 26, 2019. —Ed.