Boston’s Great Hill Partners wins auction for Pareto Captive

Boston growth equity firm Great Hill Partners has struck a deal to invest in Pareto Captive Services, Buyouts has learned.

The agreement, which has not been formally announced, marks the conclusion of a Triple Tree-run auction for Philadelphia-based Pareto.

Pareto, which helps midsize businesses mitigate employee benefit costs, was expected to command a more than $200 million valuation, two people familiar with the process said. Depending on adjustments, sources previously placed 2019 projected Ebitda within a range of $12 million to $15 million. The structure of the pending transaction is unknown; however, Pareto considered both a significant minority investment transaction, as well as a slight majority stake sale under which management would retain a large equity ownership position of some 40 percent or more, two of the people said.

Great Hill, which typically makes investments in the $40 million to $250 million range, executes various types of transaction structures, including acquisitions, growth equity, recaps and minority positions. The firm will take 8 percent to 10 percent ownership stakes, but usually upward of 30 percent, according to its website.

Founded in 2011, Pareto forms and manages employee benefit group captives, allowing self-insuring employers to band together to reduce costs and increase control over their employee benefit programs. The company targets mid-sized employers with 50 to 500 employees that are fully insured, with entities on average on the lower end of that range.

Led by Founder and CEO Andrew Cavenagh, the company has seen rapid year-over-year growth, sources have said.

The company has more recently diversified by opening its own wellness clinics, which are made available to Pareto captive members within a particular market. Participating companies offer access to primary care practices as an employee benefit.

In partnership with R-Health, which manages more than 40 practices in New Jersey and Pennsylvania, Pareto last fall opened two locations in the Kansas City area.

For Great Hill, the investment adds to existing healthcare investments focused on serving self-insured employers.

That includes existing portfolio holdings Quantum Health, which provides patient care-coordination software, as well as RxBenefits, which provides pharmacy benefits administration solutions.

In other activity, Great Hill in April 2018 recapitalized Nashville startup Vatica Health, whose risk-adjustment consultants collects patient data in doctors offices, helping private health plans more accurately bill Medicare.

Great Hill also backs Qualifacts, a behavioral health-focused electronic health record provider, and PartsSource, which provides medical parts and supplies procurement services for healthcare providers.

A Great Hill spokesperson declined to comment, while Pareto executives couldn’t immediately be reached.

Action Item: Check out Great Hill’s latest Form ADV: