TA Takes PPM Private, Imaging Company

Citing the ongoing misery inflicted on health-care services companies by the public markets, TA Associates of Boston has invested a total of $50.6 million in two separate private equity transactions.

Earlier this month, TA was the majority equity investor in the management buyout of Physician’s Specialty Corp. [PSC], a physician practice management company based in Atlanta. The transaction consisted of approximately $32.8 million in equity, with TA committing $31.8 million. Allied Capital Corp. of Washington, D.C., provided $15 million in subordinated debt and invested $1 million of equity, said David Lang, vice president at TA Associates. Additional financing came in the form of a $60 million bank loan that was arranged by First Union National Bank and included CIBC World Markets as syndication agent and Bank of America and U.S. Bank as participating lenders.

The terms of the agreement call for all existing shareholders to receive $10.50 per share in cash.

The company will remain under the same management team, which Lang said took a significant stake in the transaction that took PSC private. The senior management team includes Ramie Tritt, chairman and president, and Richard Ballard, chief executive officer.

“When good companies are being penalized there is no benefit, but a lot of cost, in being public,” Lang said. “That argues strongly for private transactions.”

As a private enterprise, Lang said the company will pursue expansion in the same fashion it had in the public markets. That strategy includes adding additional centers to complement PSC’s current focus on specialists that treat ear, nose, throat, head and neck disorders.

“There have been a number of private transactions with PPMs, especially in single specialties,” Lang said. “[PSC’s] plan is to [add] ancillary services, such as sleep and surgery centers.”

In October, TA Associates led a minority mezzanine financing in MedQuest Associates, a Norcross, Ga.-based outpatient diagnostic imaging company. The sole equity investor in the round, TA committed $18.8 million to the company.

“This was their first and only private round,” Lang said. “They could go public in a different market, but the health-care service IPO market is not great, and I think that is what led them to the private market.”

The company intends to expand through the addition of new imaging sites. The strategy hinges on development of de novo sites, where centers are built from the ground up, rather than acquiring existing facilities.

“There is opportunity in these sectors,” Lang said. “We like the business models and finding them at lower valuations is interesting to us.”