Deal of the Year: Warburg Pincus and Summit Health

Warburg Pincus’ massive expansion of Summit Health and subsequent exit earns it our overall deal of the year award as well as being the large-market winner.

If there is a word that can adequately sum up Warburg Pincus’ early 2023 sale of Summit Health – an operator of urgent care centers in the New York metropolitan area – to primary care platform VillageMD for $8.9 billion, it would be “stunning.” Yet even that term might be a tad understated considering how Warburg Pincus was able to grow Summit Health, formerly known as CityMD, during its five-year ownership.

Through 13-add-on acquisitions, which include CityMD’s 2019 milestone merger with New Jersey-based multispecialty medical group Summit Health, Warburg beefed up Summit Health’s footprint of nearly 70 locations with 300 physicians to over 370 outpatient settings and over 2,800 physicians and medical practitioners on staff.

Not only that, but Warburg was also able to extend the target company’s urgent care offerings to include both primary and specialty care capabilities. And it all started in 2017 when Warburg Pincus became the majority owner of CityMD, investing at an enterprise value of $596 million.

At that time of the transaction, CityMD was in a high-growth company phase, generating revenue of about $240 million and EBITDA of less than $40 million. Though Warburg Pincus was not focused on urgent care as a category, the buyout shop was on the hunt for attractive healthcare opportunities when CityMD came under its radar. Warburg was impressed with CityMD’s services and urban presence.

“CityMD was playing a highly strategic role in the New York healthcare ecosystem,” says TJ Carella, a managing director and head of healthcare at Warburg Pincus. “Through its ‘aftercare’ platform, CityMD provided an important care coordination service for its patients. The company was making literally hundreds of thousands of referrals annually into the community, which created real potential for future expansion.”

“For many doctors, medical staff and management team members, the sale was a life-changing moment” 

TJ Carella,
Warburg Pincus

Foremost among Warburg’s plans for CityMD was that it would satisfy a variety of healthcare needs for patients that went beyond episodic care. To meet that goal, Warburg expanded CityMD with a staggering 13 add-on acquisitions. They included not only the merger with Summit Medical Group but several urgent care centers, an orthopedic and sports medicine practice, a gastroenterology group and a urology practice.

The outcome more than fulfilled Warburg’s vision for CityMD, providing patients with affordable access to medical specialties, ambulatory care, infrastructure assets and surgery centers. As a result, CityMD, which rebranded to Summit Health in March 2021, has carved an indelible niche in the regional healthcare market as a go-to provider for patients in outpatient settings.

The covid-19 pandemic was an inflection point that brought special urgency to CityMD, which provided widespread testing to everyone, including the uninsured. And for those who tested positive, CityMD made sure each patient understood their conditions.

“That was a pivotal moment in the company’s trajectory,” recalls Carella. “Everything was turned upside down in New York; people were scared and didn’t know the consequences of infection. At the same time, the government was looking for answers as to the nature of community spread.

In partnership with the city of New York, CityMD and its front-line staff and clinicians played an important role in providing healthcare access to its many communities, serving the medical needs of its patients irrespective of insurance status and taking an all-hands-on deck approach to the broader healthcare crisis.”

Compounding the challenge of dealing with covid was Summit Health’s merger with CityMD.


Summit Health’s approximate revenues in 2022

“We acquired Summit Health in 2019,” says Carella. “Integrating those companies in the middle of covid was a challenge as we were taking two different cultures, each with its unique strengths and attributes. While any large-scale integration is complicated, we systematically identified the best people from each management team, infused the organization with outside talent where needed and merged the DNAs of these two salient brands: CityMD as a leading healthcare innovator and Summit Medical Group as a provider of comprehensive patient care of the highest quality.”

Interestingly, Warburg never formally put Summit Health on the block. However, it was open to fielding bids from interested suitors. Thanks to Summit Health’s scale and enviable positioning, many vied for the company.

“Ultimately, we thought this was a business that would be bought rather than sold because of its strategic nature, density and scale in the country’s largest healthcare market,” explains Carella. “In our experience, sometimes you have to wait for strategic acquirers to arrive at the moment when their internal dynamics line up, when they can build momentum and do what it takes to get a deal done.”

In the end, VillageMD, owned by Walgreens Boots Alliance, emerged as the victor.

“We felt it was a good home for the business,” says Carella. “Given VillageMD’s focus on advanced primary care models, we believed the merger could build upon the connected care model we had set out to create and where Summit Health’s deep specialty and ambulatory care capabilities could be additive across the rest of the VillageMD footprint.”

Warburg Pincus then worked with VillageMD for over a year to hammer out the details of a complex deal that would also involve healthcare insurer Cigna.

In November 2022, Warburg Pincus inked an agreement to sell Summit Health to VillageMD for $8.9 billion. This purchase price included $7 billion of Summit Health’s equity value with $1.9 billion of net debt. The transaction would form a combined company with roughly 20,000 employees across more than 680 locations in 26 markets that provide primary, specialty and urgent care.

With Goldman Sachs, Barclays, Jefferies, Credit Suisse and Guggenheim Partners advising Warburg Pincus, and JPMorgan doing likewise for VillageMD, the deal closed on January 3, 2023. The 2022 revenue for Summit Health was approximately $2.9 billion.

The financial impact of the exit reaped handsome rewards for the workforce. Over 650 physicians and management team members received total consideration of more than $1 million in the transaction, between cash and rolled equity. Additionally, the vast majority of the nearly 13,000 employees in the company at the time of the sale received special financial consideration in recognition of their efforts.

“For many doctors, medical staff and management team members, the sale was a life-changing moment,” notes Carella. “For us at Warburg, it was not only a great investment but also hugely gratifying to have contributed to such a great financial outcome for so many employees, shareholders and management members.”

Correction: A previous version of this report used an incorrect number for Warburg Pincus’s sale of Summit Health to VillageMD. The report has been updated.