PE-backed American Physician Partners fields first round bids

American Physician Partners, a private equity-backed provider of outsourced emergency department services to hospitals, is evaluating a sale, according to several people familiar with the matter.

Marketing materials were distributed to potential buyers earlier this month, with first round bids for the Brentwood, Tennessee, company due before the end of the week, three of the people said. Should a transaction occur, a sale to a financial sponsor is anticipated, the people said.

Moelis and Brentwood Capital Advisors are providing sell-side financial advice on the process, the people said.

This comes less than three years after BBH Capital Partners, the private equity arm of Brown Brothers Harriman, completed its recapitalization of American Physician Partners.

Brentwood Capital advised American Physician Partners on the January 2017 transaction, while a $42.2 million private equity fund affiliated with Brentwood Capital, BCP II, co-invested alongside BBH.

Led by industry veteran and CEO John Rutledge, APP provides outsourced emergency department and management services to surgical hospitals.

Fueled by both organic growth and M&A efforts, the company has expanded quickly since its April 2015 inception. Initially created through the acquisitions of Align MD and Elite Emergency Services, APP now encompasses more than 120 care sites across the country, according to its website.

Potential buyers characterize APP as a well-performing business, pointing to its impressive management team—many of which are former hospital executives—and the significant remaining M&A opportunity, sources said.

APP generates more than $100 million in pro forma adjusted Ebitda; however, sources said it remains too early in the process to determine valuation expectations given the asset’s fast growth, the lack of recent comparable transactions and a challenging industry backdrop.

Congressional leaders on Sept. 16 sent letters to PE firms including KKR, Blackstone Group and Welsh, Carson, Anderson & Stowe, which own or have owned physician staffing companies. The inquiry questions the firms’ roles in surprise medical billing practices, also known as “balance billing.”

The letter specifically highlights Blackstone-backed TeamHealth and EmCare, which KKR acquired through its $9.9 billion mega deal for Envision Healthcare in 2018.

Further weighing on the pair of companies are ongoing contract disputes with UnitedHealth Group, which recently said it planned to cancel high-reimbursement, in-network contracts with TeamHealth.

APP, for its part, has never lost a contract, does not do “balance billing” and is in-network, some of the sources said. Still, the uncertainty facing TeamHealth and Envision, as well as Congressional noise around the industry, could extend the process as potential buyers wait for things to blow over, two of the people said.

BBH Capital Partners, for its part, typically invests between $10 million and $125 million in companies with enterprise values of $10 million to $500 million.

The firm’s latest healthcare investment is Ethos Veterinary Health, a veterinary care company it recapitalized in January. BBH Capital Partners also owns Haven Behavioral Healthcare, a specialty behavioral healthcare services company.

Representatives of BBH Capital didn’t return requests for comment, while those with American Associate Partners couldn’t be reached on Wednesday. Moelis and Brentwood declined to comment.

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