Centerbridge invests in GoHealth after renegotiating terms of ~$1.5 bln transaction

After walking away from a transaction earlier this month, Centerbridge Partners and GoHealth have renegotiated terms to clinch a deal valued at approximately $1.5 billion, including a potential earnout, according to people familiar with the matter.

Centerbridge said Monday it had agreed to invest in GoHealth, a fast-growing Chicago company that helps individuals shop for healthcare insurance. The deal is expected to close in the fourth quarter.

The transaction came together after the New York private equity firm pulled back from an alternative agreement due to a discrepancy around price.

The previously anticipated agreement assigned GoHealth a total enterprise value of around $1.5 billion, which included a close to $1.4 billion upfront consideration and a potential earnout, the people said.

Under the newly-renegotiated deal structure, the approximate $1.5 billion comprises a smaller upfront consideration and larger earnout component, one of the people said.

Buyouts initially reported in early July that GoHealth, backed by Norwest Equity Partners, was in the late stages of a William Blair-run sales process.

Founded in 2001 by President Brandon Cruz and CEO Clint Jones, GoHealth is an online exchange used by individuals, families and businesses to compare and match with the best and most affordable health insurance coverage for their needs. The company’s more than 10,000 licensed insurance benefits advisers use proprietary software to consult with and enroll consumers in insurance policies by phone or online at no cost.

Its core market is Medicare Advantage for seniors, which, one of the people noted, accounts for about 60 percent of GoHealth’s revenue but less from a total lives perspective. GoHealth in addition helps small business chose benefits for employee groups, as well as facilitates coverage for life insurance and dental insurance, among other offerings.

Broadly speaking, GoHealth and eHealth, the parent of, represent the two largest players in the industry that link seniors with Medicare plans.

That said, each only account for some 1.5 percent of Medicare Advantage market today, one of the people said, lending to significant potential runway for growth. With shares surging more than 250 percent over the last 12 months as of Monday, eHealth has already proven to have success pivoting to the post-65 channel.

In other relevant activity, Clayton, Dubilier & Rice recently completed its $1.3 billion all-cash sale of Tranzact to Willis Towers Watson. Tranzact offers services similar to GoHealth but is considered more of a lead generator for insurers, helping maximize branding and sales through various means.

In connection with the Tranzact sale, CD&R generated a gross multiple of 3.2x and gross IRR of 47 percent, Buyouts reported, with the $200 million potential earnout included in the initial agreement eliminated.

Elsewhere, Health Insurance Innovations announced July 26 that it had commenced a process to explore strategic alternatives, including a potential sale of the company. The company differs in that it has historically focused on facilitating short-term medical insurance, often attacked for undermining Obamacare. 

Smaller PE-backed companies operating in the universe of GoHealth include Pelotan Equity-backed HealthPlanOne and SelectQuote.

Centerbridge representatives didn’t immediately return a request for comment on Tuesday.

Action Item: Check out Centerbridge’s latest Form ADV: