Warburg joins Great Hill as investor in Quantum Health

The new capital injection will support additional growth in the consumer healthcare navigation company, which sources told PE Hub is already growing at a rate of around 35%.

Warburg Pincus is making a significant investment in Quantum Health, which helps reduce healthcare costs for self-insured employers and their members. 

Great Hill Partners, the company’s current majority owner, will remain a significant minority shareholder. The Boston-based growth equity firm originally backed Quantum in June 2017.

In connection with the transaction, CEO Kara Trott will remain chair of the board of directors. TJ Carella and Andrew Park of Warburg will join the board alongside existing Great Hill directors Mark Taber and Rafael Cofino — implying the pair of firms will share equal governance of Quantum. 

The new capital injection, which has not yet closed, is set to accelerate growth at the already fast-growing company. 

Warburg’s winning bid for a stake in the business comes about a week after PE Hub wrote that Quantum was fielding final round bids in a William Blair-run sale process. Financial terms have not been disclosed, but sources previously said a deal was expected to value the Columbus, Ohio, company significantly north of $1 billion. 

Goodwin Procter provided legal advice to the Quantum on the transaction, while Warburg turned to Kirkland & Ellis. 

Founded in 1999 by CEO Kara Trott, Quantum provides healthcare navigation and care-coordination tools for small- and medium-sized self-insured employers. To date, the company has provided a simplified healthcare experience to more than 1.7 million plan participants across more than 400 employers. 

Growing at a rate of around 35 percent, Quantum is projecting 2021 ARR [annual recurring revenue] of $218 million, up from $178 million ARR as of February 2020, PE Hub previously wrote. 

One source placed EBITDA at $36 million, while another said adjusted EBITDA is more like $50 million.

For Warburg, the deal follows its September strategic investment in GA Foods, which provides nutritional meals for healthcare and senior customers. The growth-focused global buyout fund also backs Outset Medical, whose $242 million IPO in September valued Warburg’s stake approximately 6x its initial investment, PE Hub wrote. 

In other brewing activity, Warburg is an investor in Alignment Healthcare, a risk-bearing managed-care provider that is anticipated to consider a potential IPO in 2021, PE Hub wrote. 

Great Hill has also been active in recent weeks. The deal comes after the firm brought on Advent International as an investor in RxBenefits, which helps self-insured employers manage pharmacy benefits and costs, PE Hub wrote. The pending recapitalization is set to value the Birmingham, Alabama, company north of $1 billion, people familiar with the transaction said early this month.