Crescent Capital Investments Inc., the U.S. private equity arm of First Islamic Investment Bank, E.C., last month purchased The Potomac Group Inc. for $117 million. The company, a Nashville-based health-care company that provides real-time eligibility verification for health-care patients, has been renamed MediFAX-EDI Inc. The purchase price represents a multiple of approximately six times Ebitda.
The deal was financed with equity from Crescent Capital, which invests on behalf of shareholders of First Islamic and other investors in the Middle East, and a $45 million senior credit facility was provided by Bank of America N.A. and BankOne Kentucky N.A.
With the completion of the deal, Crescent Capital took 100% of MediFAX-EDI, but Charles Ogburn, an executive director at Crescent, said the firm will immediately put in place “a pretty healthy management option plan.” David Bacon Jr., who was president and chief operating officer at The Potomac Group, is now chief executive and a director of MediFAX-EDI.
Ogburn, who was an investment banker at Robinson-Humphrey for 15 years before joining Crescent in March, had his eye on The Potomac Group since the company’s failed attempt to find a buyer approximately two years ago.
“Since then they’ve seen a management change,” he said. “I was fairly close to the company through some of the board members and was aware that the company’s financial performance just continued to improve through all that. [So I] convinced my partners that we ought to take a look at it.”
Crescent Capital was not specifically seeking a company in the health-care industry or the database information field both of which could describe MediFAX-EDI but liked that “it has some shelter in a weak economy,” said Ogburn. “We did like particularly the fact that given the concerns about a weak consumer economy that this is a business that is somewhat buffered from that.”
As for growth, Crescent Capital plans to grow the company organically and may consider add-ons in the future. “The company is growing very nicely now,” Ogburn said.
He added, “One thing we liked was its long-term strategic opportunities to provide additonal kinds of services through [its connectivity with a large number of hospitals and physician practices]. So other things that involve the back office of health care, in terms of claims processing, claims submission, claims settlement . . . is where we’re heading.”
In Crescent Capital portfolio news, WaterMark, a manufacturer of kayaks and canoes, this month acquired Yakima Products Inc., a manufacturer of sports-related racks, for an undisclosed price. Crescent Capital acquired Perception Group Inc. and Dagger Canoe Co. in June 1998, which merged to form WaterMark.