American Securities Capital Partners has purchased Press Ganey Associates Inc. , a health care survey and services company, from its founders for a purchase price of more than $100 million, according to a source close to the deal.
The debt-to-equity split was roughly 50% to 50%, according to Glenn Kaufman, a managing director with American Securities. Antares Capital Corp. and Madison Capital Fundingcontributed $58 million in senior bank notes to the deal.
“All our transactions are structured [solely] with senior debt,” said Kaufman. “It gives the target more flexibility to operate and simplifies the closing process. With mezzanine debt, the question is: ?Are you focused on the leverage or on the operations of the target company?? We are doing the latter.”
The remainder of the purchase price was in the form of equity, the bulk of which derived from American Securities Partners III, a $650 million fund closed in July 2001. According to Kaufman, the fund is between 40% and 45% invested, having made five investments to date. The fund does allow for co-investments, as evident by the minority stakes held by Press Ganey management and its founders.
Dresner Investment Services, a Chicago-based intermediary and part of Dresner Co., introduced ASCP to the sellers. “About a year ago [the founders] got serious about selling, and through an auction picked ASCP in May,” said a spokesman for Press Ganey. “We interviewed several private equity firms, but there was no bidding war. There was a connection between [CEO Melvin] Hall and the ASCP people.”
Hall has been with Press Ganey for 10 years, and since 1997 has served as CEO, after founders Irwin Press and Rodney F. Ganey stepped away from the day-to-day operations.
Founded in 1985 and headquartered in South Bend, Ind., Press Ganey creates patient satisfaction surveys. Press and Ganey were previously professors of anthropology and sociology, respectively, at Notre Dame, and have developed 25 separate surveys used in approximately 30% of all domestic hospitals and 40% of hospitals with more than 100 beds. “They had their entire portfolio of investments in this operation, were both retired from Notre Dame, and wanted to diversify their holdings,” said the company spokesman, in describing the cash-out. Both Ganey and Press are still stockholders in the company and maintain positions on the board of directors. Despite an already substantial hold on the hospital survey sector, Kaufman sees immediate opportunities for organic growth.
“We think the business has the opportunity to extend its reach into other health care verticals, including nursing homes, private medical practices and outpatient clinics.” Kaufman also said there are no planned changes to management or the 350 employees. “There is a huge base of intellectual capital. They create the surveys, customize to the needs of specific customers, fulfill the survey, compile and analyze the results and provide specific and comparative data for customers,” he said. “They fulfill the most basic and fundamental part of the hospital program?to improve operations.”