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Marlin’s $700M Health IT Deal Sets Stage

In 2015, Hermosa Beach-based private investment firm Marlin Equity Partners added to its significant portfolio of health IT companies by acquiring South Jordan, Utah-based AdvancedMD – a pioneer in cloud technology for physician practices – from payroll and human resources firm Automatic Data Processing Inc. (ADP).

Three years later, in 2018, Marlin announced the sale of AdvancedMD to Global Payments Inc. for $700 million. The acquisition closed in September.

Global Payments said in a statement that it expects AdvancedMD to contribute revenue in a range of approximately $7 million to $8 million and to have no impact on earnings per share. Marlin has said it has $6.7 billion of capital under management.

During an Oct. 30 company earnings call, Atlanta-based Global Payments hailed the acquisition of AdvancedMD as part of a shift in its business mix toward technology enablement, predicting that the area would comprise nearly 45 percent of the company’s revenue in 2019, up from 40 percent in 2017.

The AdvancedMD acquisition by Marlin is one of many signals that Los Angeles is coming into its own as a hub of health care technology investment and innovation.

“The local burgeoning tech scene combined with large pockets of institutional capital and mid-to-large corporate organizations means tech-enabled sectors will continue to garner interest here in a meaningful way,” said Vishal Gandhi, founder of boutique health care advisory firm Keval Health, located in Santa Monica. “What may be notable is the diversity of interest into areas other than entertainment, real estate and law, such as in healthcare IT, fintech and consumer tech.”

Health deals thrive

The AdvancedMD deal is part of a string of transactions featuring Marlin portfolio companies, not all of which have been successful.

Marlin put up for sale in 2017 another large health IT company, E-Mds Inc., but no buyers emerged. E-Mds may be less attractive because its technology is not cloud-based and therefore more expensive since it requires more equipment, as well as being more difficult to integrate with other businesses and technologies.

Marlin’s activity in the health care technology space has been equally aggressive on the acquisition side in 2018. In May, Marlin scored another high-profile deal that exemplifies the company’s growing interest in health IT: It announced the acquisition of both Providence, R.I.-based Virgin Pulse Inc. and Minneapolis-based RedBrick Health Corp., which were merged under the Virgin Pulse name but continue to operate as separate brands.

At the time of that announcement, Michael Anderson, a Marlin managing director, said in a statement that the deal underscored Marlin’s belief in the potential to transform the market.

“This is a multibillion-dollar market that is hungry for innovation, desperate for disruption and ripe for consolidation,” Anderson said. “We are committed to doubling down on these two leaders to move this market forward and unlock the value of employee health and wellbeing.”

In November, Marlin added to the portfolio by acquiring Dallas-based SimplyWell Inc., a provider of health management solutions for companies and their employees, bolting the company to Virgin Pulse.

Bigger picture

Marlin’s flurry of activity in the wellness IT arena was arguably part of a larger trend among Los Angeles area companies in 2018. In December, Santa Monica-based private equity firm Clearlake Capital Group completed its acquisition of Symplr, a software technology company based in Houston, for a reported $550 million. Symplr provides solutions for healthcare organizations to manage compliance and credentialing requirements for providers, staffs and contractors.

The trend shows that firms are looking toward technology that facilitates putting health care information in the hands of the consumer, including access to updates and test or examination results.

Marlin’s AdvancedMD sale and Clearlake’s acquisition shared the national stage with two health IT megadeals in 2018: The acquisition of Watertown, Mass.-based Athenahealth Inc. by Veritas Capital Fund Management and Evergreen Coast Capital Corp. for $5.7 billion, and the acquisition of Cotiviti Holdings Inc. by Verscend Technologies Inc., a portfolio company of Veritas.

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