- EHR vendor Athenahealth is being acquired by Bain Capital and Hellman & Friedman for $17 billion, the companies announced Monday. The transaction, which will be financed through a mix of equity and debt, is expected to be completed in the first quarter of next year and is the latest in a recent string of large leveraged buyouts.
- The two private equity firms are nabbing Massachusetts-based Athenahealth from its current owners, Veritas Capital and Evergreen Coast Capital, the PE arm of activist investor Elliott Management Corp. Veritas and Evergreen will each retain a minority investment in the vendor.
- Athenahealth, which says it is the biggest provider of cloud-based EHR and physician practice IT tools in the U.S., struggled before it was taken private in 2019, reporting flagging revenue and disappointing bookings in the competitive health IT sector.
Athenahealth Chairman and CEO Bob Segert called the transaction a "significant milestone" for the 24-year-old vendor, while Hellman & Friedman partner Allen Thorpe said in a statement Athenahealth's new owners plan to rapidly scale the business and create a multi-sided digital care network between patients, payers and providers.
Athenahealth provides cloud-based software to providers that helps practices conduct telehealth visits, manage population health and maintain patient medical records, among other functions. The vendor's software is used by roughly 140,000 ambulatory care providers nationwide.
It's one of a handful of companies operating in the highly concentrated EHR market, competing with bigger players like Cerner and privately-held Epic Systems.
Those rivals steadily chipped away at Athenahealth's client base among hospitals, which usually result in larger and more lucrative software deals. Athenahealth eventually exited the small hospital market in late 2019.
In 2018, Athenahealth's largest shareholder, Janus Henderson Group, urged the vendor to look for a buyer after it became concerned about the company's management and performance following a turbulent year.
After fielding numerous interested parties, Athenahealth was acquired by Elliot's PE arm Veritas and Evergreen in 2019 for about $5.7 billion following an acrimonious activist campaign led by Elliot that eventually resulted in the departure of Athenahealth's co-founder and former chief executive, Jonathan Bush. Bush stepped down as president and CEO in June 2018 after it surfaced in a 2006 divorce proceeding that he had assaulted his then-wife.
Veritas and Evergreen took the health tech player private and combined it with Veritas-owned Virence Health Technologies, formerly part of GE, and began operating the new business under the Athenahealth brand. Its new owners laid off a significant percentage of its global workforce, restructured its management team and moved its network more toward a platform-as-a-service EHR model.
And Bloomberg reported in September the PE duo was weighing several strategic options for the company, including a potential sale or public offering. Demand for health tech has skyrocketed over the past year and a half as the coronavirus pandemic drove consumers to look for new digital avenues to access the healthcare system.
Along with Hellman & Friedman, Bain Capital Private Equity, Bain Capital Tech Opportunities and Veritas and Evergreen, new co-investors in Athenahealth include Singapore's sovereign wealth fund GIC and a wholly owned subsidiary of the Abu Dhabi Investment Authority.
Current chairman and CEO Bob Segert will continue to lead Athenahealth, along with the existing management team.
Large leveraged buyouts, which involve one or multiple companies taking on significant amounts of debt to acquire another company, largely disappeared following the 2008 recession. But a rash of recent proposed or ongoing LBOs signal PE firms appetite for the billion-dollar deals may be returning, as many sit on record amounts of unspent cash.
The mammoth $17 billion buyout of Athenahealth isn't even the largest in the healthcare sector this year: In June, a group of PE companies agreed to purchase medical supply giant Medline Industries for more than $30 billion — reportedly the biggest leveraged buyout in a decade.