Thoma Bravo closes Nearmap deal; inside Warburg’s $8.9bn sale of Summit Health-CityMD

Good morning, Hubsters! Aaron here, as we inch closer to the holidays and the end of the year.

To start things off, we’re going to take a deep dive into a mega healthcare exit and then examine a fresh healthcare deal that was just announced. Also, Thoma Bravo continues to make moves.

And the second episode of our new podcast series, Private Markets and the End of Cheap Money, is out this morning. This episode focuses on LPs rethinking the role of private equity in this era of higher interest rates.

Exit exit, read all about it. Recently, I caught up with Thomas “TJ” Carella, managing director and head of healthcare at Warburg Pincus, and he took me through the complex transaction that saw Warburg sell Summit Health-CityMD to Walgreens’ VillageMD for $8.9 billion.

Warburg became the majority owner of City-MD in 2017 and completed the merger with Summit Health in 2019. Over the course of ownership, Warburg invested $500 million in the combined company. When the deal closes early in 2023, Warburg is expected to score a multibillion-dollar profit on the sale, a source close to the deal told PE Hub.

One of the biggest drivers of growth for the asset was the 12 strategic add-ons made during the hold period, as the firm was consolidating the sector. Out of those, the acquisition of Summit Medical Group was key.

“Given its capabilities and reputation with consumers, we thought the company could expand beyond urgent care and start addressing the additional healthcare needs of our patients, which was really the catalyst for the acquisition of the northern New Jersey-based, large-scale physician organization Summit Medical Group,” he said. “This was an important step towards eventual broader market coverage and the combined company’s rebranding to Summit Health.”

When it came to selling, the business was not really for sale, per say.

“Although the business was not ‘for sale’ per se, we were always open-minded to interesting inbounds,” said Carella. “We considered this business as one that would be bought as opposed to sold, meaning that a company so strategically relevant to one of the most important US healthcare markets would necessarily attract the right buyer’s interest at some point.”

You can read the whole story here.

Clinical research. GHO Capital-backed Velocity Clinical Research just announced it has acquired Meridian Clinical Research for an undisclosed amount, creating the largest dedicated research site organization in the world, according to Velocity. The network includes approximately 80 sites in the U.S. and Europe, including a tech hub in Hyderabad, India.

“Delays at research sites are the biggest pain point in drug development,” said Paul Evans, president and chief executive of Velocity. “The global market for investigator fees is $20 billion so there is a lot of runway. Research is typically done by physicians with a full clinical practice. Therefore, clinical trials often do not get the attention they need, resulting in hugely inefficient processes and a highly fragmented market.”

This move helps broaden Velocity’s therapeutic base and expand geographically, according to Evans.

“Meridian has a lot of sites that operate like Velocity’s and some that operate within a different model,” he said. “Meridian has taken space and put staff in existing clinical practices that are usually dedicated to specialist environments, like neurology. Whilst this is a fairly new direction for Meridian, we want to expand on this model and continue to leverage it.”

Can’t stop, won’t stop. Thoma Bravo keeps making moves. This morning, the software-focused PE firm announced the completion of its acquisition of Nearmap, a location intelligence and aerial imagery headquartered in Sydney, Australia. The deal is valued at approximately $723 million.

“Nearmap is at the forefront of innovation in aerial imagery, data and analytics, and the company is well-positioned to capitalize on the growing global demand for its services,” said A.J. Rohde, a senior partner at Thoma Bravo. “There is a large unmet need for cloud-based geospatial information technology and comprehensive insights, particularly in North America, representing one of many growth opportunities for Nearmap. We are excited to partner with Rob and his talented team to build on Nearmap’s momentum and further expand its global footprint.”

Listen in. Central banks around the world have been raising interest rates to combat inflation, making borrowing more expensive for everyone. That includes private equity firms, which for years have enjoyed historically low borrowing costs to finance leveraged buyouts.

So how are private equity firms coping with the end of cheap money? To find out, reporters and editors across several PEI Group titles, including PE Hub and Buyouts, have spent the last few months speaking to dozens of industry participants to get their perspectives.

In this second installment of our five-part podcast miniseries, Private Markets and the End of Cheap Money, we look at how higher interest rates are impacting limited partners and their ability to provide private equity funds with fundraising capital, the lifeblood of the industry.

Chris Witkowsky, editor of affiliate title Buyouts, spoke with LPs and consultants about how institutional investors are approaching the higher-rate environment, including by potentially shifting asset allocations. Significantly, LPs discuss what they are looking for in GPs amid the new environment.

Featured in this episode: Andrea Auerbach, global head of private equity at Cambridge Associates; Jim Pittman, executive vice-president and global head, private equity, at British Columbia Investment Management Corporation; Craig Ferguson, managing director, private equity, with Investment Management Corporation of Ontario; and Drew Schardt, head of global investment strategy, co-head of investments and co-head of direct credit at Hamilton Lane.

Listen to the second episode here.

And click here to hear the first episode, in which PE Hub editor-in-chief MK Flynn spoke with PE pros about the impact of high interest rates on dealmaking.

That is a wrap for today, I will be back with you all tomorrow. Until then, happy dealmaking…