Some healthcare analysts believe that even if long-term acute care (LTAC) hospitals were to double the amount of beds they currently have, the hospitals still wouldn’t be able to meet the current demand for the services they provide. That intelligence was one of the guiding factors that led TA Associates to make its latest acquisition. The Boston-based buyout shop now owns a control stake in Triumph HealthCare LLC, a privately-owned, Houston, Texas-based, hospital management company that developed and operates five LTAC hospitals and has a reported enterprise value of approximately $185 million.
Triumph’s five hospitals are all located in the greater-Houston area and focus on acute patients, which require hospital stays that average 25 days or more, due to debilitating injuries or chronic illnesses. Ventilator weaning, cardiac monitoring, rehabilitation, pain management, wound care, dialysis and a number of outpatient services are among the typical services the hospitals offer.
All of Triumph’s services are covered by Medicare, making all of the its patients at least 65 years old-though the average age leans closer to eighty. “The elderly is one of the faster growing ends of the population in the country,” said Richard Tadler, the TA managing director who leads the firm’s healthcare investments. “Unfortunately, oftentimes when you’re dealing with that age group, you think you fix one thing and then something else pops up. That puts [Triumph’s] services in high demand.”
Terms of the deal, which closed late last month, were not disclosed, but published reports claim that Triumph generates more than $150 million in annual revenue and $30 million to $40 million of EBITDA. TA infused approximately $35 million to $40 million of equity and $20 million of subordinated debt in to the transaction. The reports also states that Triumph’s shareholders, including its founder Robert Helms Jr., rolled over approximately $20 million in stock. When asked to confirm these figures, Tadler declined to comment.
Financing was provided by BNP Paribas, which provided a $25 million senior-secured revolver and a $90 million senior-secured term loan.
To take advantage of the growing sector, TA is reviewing opportunities that will transform Triumph from the local entity it is today into one with the resources available to compete on a national scale. The firm will seek out strategic acquisitions to spur the necessary growth in addition to carrying on Triumph’s growth model of building LTAC hospitals from the ground up.
And once all is said and done for the investment, Tadler surmised a strategic sale of the company would likely be the firm’s exit. He noted that a company like Select Medical-which just agreed last month to be taken private by Chicago-based private equity firm Welsh Carson Anderson & Stowe in a $2.3 billion transaction-would be a likely buyer for a larger, more-robust Triumph. Another possible buyer, he added, is Kindred Healthcare Inc., a publicly-owned, long-term, healthcare provider that, last year, made more than $3.284 billion in sales and earned a net income of $75.3 million.
For the equity portion of the deal, TA tapped two of its funds, TA IX LP and TA Atlantic & Pacific IV LP. The former is a vintage-2000 vehicle that closed with more than $2 billion in commitments and is now about half invested. The latter closed in 1999 with $500 million in dry powder and, following this transaction, is close to fully invested, Tadler said. Its replacement fund, TA Atlantic & Pacific V LP, is expected to hold a final closing later this month. As of September, Fund V raised approximately $1.6 billion in limited partner commitments.