Optimistic market watchers have been discussing the mounting upturn in the overall economic environment, and one indicator in the leveraged buyout community that the glass is indeed half-full is the strategic buyer coming back to market.
Last month, Crescent Capital agreed to sell Medifax EDISM Inc. to WebMD Corp. in a $280 million all-cash deal. Concurrent with the sale, Crescent will spin off Medifax’s pharmacy services division and continue to own the pharmacy arm.
The deal is expected to close this month.
“Medifax is a business that has characteristics that do interest financial sponsors, but the health care industry is one in which there is a tremendous opportunity for consolidation,” said Charlie Ogburn, an executive director with Crescent. “WebMD is leading that consolidation, and we weren’t surprised they found the company attractive.”
Headquartered in Nashville, Tenn., Medifax provides health care information technology solutions to providers and payers, including real-time medical eligibility transaction services and claims management solutions to hospitals, medical centers and physician practices in the U.S.
Crescent originally purchased the company in June 2001, then know as The Potomac Group, for $123 million and by March 2003, had purchased three add-ons worth approximately $45 million. “We let management run the show, and they did a great job blocking and tackling, and executing the business plan,” Ogburn said.
“Medifax had more than 400 shareholders, with no single person owning more than 10 percent,” he continued. “It was a dysfunctional shareholder situation and a distraction to management. Our purchase freed them up to focus on the business.” With management freed from shareholder worries, Ogburn said, including the three add-ons, Medifax EBITDA more than doubled during Crescent’s ownership.
Atlanta-based Crescent Capital was founded in 1997, and as the investment arm of First Islamic Investment Bank E.C. has performed 11 transactions with an aggregate enterprise value of more than $1 billion. Headquartered in Bahrain, First Islamic is part of a growing list of investment banks in the Arabian Gulf states that follow Islamic banking principles, which include the forbiddance of earning or paying interest, and ensuring all transactions must be backed by underlying assets. Some estimates place the amount of funds in Islamic banks in the neighborhood of $250 billion, and predict that number will grow as the transfer of wealth from government-run groups to the private sector becomes more common.
Lawyers: Crescent: King & Spalding; WebMD: Shearman & Sterling
Accounting Firms: Ernst & Young (for both parties)
Financial Advisors: Crescent: SunTrust Robinson & Humphrey; WebMD: Raymond James & Associates