TA Adopts An Extended Family –

After keeping an eye on Youth and Family Centered Services Inc. (YFCS) for more than 18-months, TA Associates finally made its move. Earlier this month, the Boston-based buyout shop closed a $205 million deal, purchasing a control stake in the health-services company from private equity firm Cravey Green & Whalen (CGW).

TA bought the company using capital from its TA Subordinated Debt Fund, TA IX LP and TA Atlantic & Pacific IV funds. The debt portion of the transaction was arranged by GE Capital. The deal was broken down to about 50% equity and 50% loans.

Raymond James & Associates ran the auction. TA’s decades of experience investing in the health-services industry coupled with an acquaintanceship with CGW Partner Bart McLean are two factors that helped the firm win the sale. “And of course the offer price had something to do with it. There was a substantial amount of equity involved in this deal,” said TA Associates Managing Director Richard Tadler.

Founded through a partnership with CGW in 1997, Austin, Texas-based YFCS is a multi-faceted provider of health, education, long-term support service and alternative housing for abused and neglected youth. It has 14 locations in nine states and is one of the largest companies in the U.S. that focus primarily on meeting the behavioral needs of children and adolescents.

The transaction walked CGW a few steps closer to the exit door, but the Atlanta-based private equity firm did not sell itself out of the building. Instead of making a clean break from YFCS, the firm decided to rollover an $11 million investment in the company for an ownership stake of approximately ten percent. The firm’s co-investors-BCI Partners and TCW Capital-did, however, exit entirely.

YFCS facilities are covered by state Medicaid budgets and other state agencies. They provide services that include acute psychiatric care; treatment for alcohol and drug abuse; psycho-social residential treatment centers; GED preparation, vocational education, life-skills instruction; placement in group homes; therapeutic foster care; services for the mentally retarded; and emergency shelters.

This marks TA’s 12th investment in the Healthcare Services sector of its portfolio. But YFCS is the only company that the firm has an investment in that is focused on children and therapeutic endeavors. Other recent healthcare investments that TA made include the 2003 recapitalization of Logistics Health Inc.; the buyout of One Call Medical Inc.; and the growth investment in National Imaging Associates Inc.

Tadler, who will join YFCS’s board of directors, said the involvement with the company will be focused on expansion and development. “We will encourage the continuation of its traditional growth-both organic and by acquisition.” TA’s radar is already lit with possible add-ons for the new acquisition, Tadler said.

TA also has its eyes on a couple of healthcare companies that focus on the behavioral issues similar to YFCS-in adults rather than children-to add to its portfolio, Tadler said.

The Exit

Strategically, the transfer of YFCS’s control from CGW to a larger firm was necessary to ensure a steady path of growth-by-acquisition for the company. That TA was the winner of the bid also had a tactical underlining.

“From a company standpoint, the consolidation opportunities that were presenting themselves [to YFCS] would require much deeper pockets than ours,” CGW Partner Bart McLean said. “We were looking for an investor with equity and experience [investing in health services] hence the good match up with TA.”

The sale made CGW 6x its $17 million investment in the company since 1997.

The firm walked YFCS through five acquisitions in seven years, including the purchases of Lakeland Regional Hospital in Springfield, Missouri; Crossroads Regional Hospital in Alexandria, La.; and Youth Services International, in Owings Mills, Md.

“I think this company is just outstanding and whoever invests in it will be successful… That’s why we kept an ownership stake with the company,” McLean said.


Buyer: TA Associates

Target: Youth and Family Centered Services Inc.

Price: $205M

Legal Counsel: TA Associates: Goodwin Proctor LLP; YFCS and CGW: Alston & Bird LLP

Financial Advisor: CGW: Raymond James Healthcare Group

Accountant: TA Associates: KPMG