Waystar preempts sale process for Francisco’s eSolutions in $1.3bn-plus deal

EQT and CPPIB last summer agreed to acquire a majority stake in Waystar in a $2.7 billion deal, leaving previous investor Bain Capital with a minority stake.

Private equity-backed Waystar has clinched a deal to buy Francisco Partners’ eSolutions in what marks the latest sizable healthcare technology company to trade hands in recent months, PE Hub has learned.

The deal values Overland Park, Kansas-based eSolutions between $1.3 billion and $1.4 billion, according to people familiar with the matter.

ESolutions is projecting $68 million in 2020 adjusted pro forma EBITDA, sources said, implying a more than 20x EBITDA multiple. The deal’s value surpasses expectations in the 18x to 20x range, based upon that EBITDA projection, the people said. 

Waystar, which uses technology to simplify the revenue cycle management process for healthcare providers, put a quick stop to the sale process for eSolutions, another provider of RCM. 

A William Blair-run process for eSolutions kicked off in early July, with first-round bids due less than a week ago, sources said. No in-person meetings were held during the process, however eSolutions had met with most bidders before covid-19, the people said.

The parties signed a deal over the weekend, they said.  

Strategic fit

Waystar, backed by EQT, Canada Pension Plan Investment Board and Bain Capital, has long been viewed as a likely buyer of eSolutions. The company, formed through Bain’s marriage of Navicure and Zirmed in 2017, has been an active consolidator of the RCM market.

Led by CEO Matthew Hawkins, Waystar’s recent acquisitions include Recondo Technology, Digitize.AI, Connance, Ovation and Paro. 

While few other strategics would have made a logical buyer, a competitive auction also produced bids from large buyout funds, the people said.

Besides creating valuable cost and revenue synergies, eSolutions fills an important gap for Waystar, sources said. The acquisition significantly bolsters its revenue cycle and workflow management tools tailored to the Medicare market – an increasingly important and growing area of healthcare reimbursement. 

In other words, the combined company will manage and improve revenue collections across both commercial and government payers, serving various settings of care.

For Waystar, the deal comes approximately a year after Swedish private equity firm EQT and CPPIB agreed to acquire a majority stake in Waystar. The deal, valued at $2.7 billion, left previous investor Bain Capital with a minority stake in the company.

Francisco Partners, an active investor in healthcare technology, first invested in eSolutions in January 2015. 

Health tech activity

The healthcare technology industry has proven resilient through the downturn, with the deal following a robust level of activity this summer. 

In July, TA Associates and Francisco Partners agreed to jointly invest in Edifecs in a deal assigning the healthcare technology company an initial valuation just north of $1.42 billion

For Francisco Partners, the investment follows its June sale of a minority stake in QGenda to ICONIQ Capital. The deal produced a $1 billion-plus valuation for the provider of healthcare-focused workforce management software. 

In one of private equity’s largest healthcare tech deals of the year, Leonard Green & Partners acquired a stake in TPG Capital’s WellSky in a $3-billion-plus deal.

Elsewhere, Clearlake Capital Group is evaluating strategic options for Symplr, hoping to fetch a $2 billion valuation for the provider of healthcare governance, risk and compliance software.

Action Item: Read more on TA and Franciso’s recent deal for Edifecs.