Beecken Petty Returns To Outsourcing

Target: Sterling Healthcare

Price: Undisclosed

Sponsor: Beecken Petty O’Keefe & Co.

Seller: Resurgence Asset Management

Financial Adviser: Seller: Nexus Health Capital

Legal Adviser: Sponsor: Kirkland and Ellis LLP;

Beecken Petty O’Keefe & Co. is ramping up its exposure to hospital outsourcing. The Chicago-based buyout shop last week acquired Sterling Healthcare, a company that manages billing, collections, staffing and other aspects of hospitals’ emergency departments, from Resurgence Asset Management.

Terms were not released on the deal, brokered by Nexus Health Capital LLC. GE Healthcare Financial Services provided an asset-backed revolver and a term loan to finance the deal.

The firm has invested in this niche twice before. Earlier this year, it acquired from Madison Dearborn Partners a majority stake in Valitas Health Services, a company in which Beecken Petty O’Keefe held a minority stake since 1997. In November 2005, Beecken Petty O’Keefe and Madison Dearborn sold Team Health Inc. to The Blackstone Group after a six-year ownership.

Hospital management offers a great outsourcing opportunity because staffs nationwide are struggling to keep up with the number of patients with little or no insurance, said Greg Moerschel, a Beecken Petty O’Keefe partner. The trend “presents a great outsourcing opportunity, which is why companies like Sterling and others are growing quickly,” he said.

The market is replete with smaller outsourcers that Beecken Petty O’Keefe can target as add-on acquisitions, Moerschel said. The company generates $100 million in annual revenue. Moerschel believes Beecken Petty O’Keefe can triple that number in two years through acquisitions. The firm has been identifying potential add-on targets for the last five or six months, he said, and has reserved an additional $100 million of equity to support the company’s growth.

Charterhouse Group Inc., a New York-based firm, is taking a similar strategy with its recent acquisition of Chamberlin Edmonds Associates, which GE Healthcare Financial Services also helped finance. The Atlanta-based company contracts with hospitals and helps uninsured or under-insured patients determine if they’re eligible for governmental or charitable assistance.

Beecken Petty O’Keefe made the investment from its third fund, a $650 million vehicle it is currently raising. Resurgent Asset Management did not return a call requesting comment.