It’s more than just the increase in capital that’s making buyouts the investment of choice | Liam Arbuckle

News that healthcare company Atrium Health, Inc. will be acquired by private equity firm Veritas Capital for approximately $17 billion represents a continuation of a trend that investors and traders have been waiting to…

It's more than just the increase in capital that's making buyouts the investment of choice | Liam Arbuckle

News that healthcare company Atrium Health, Inc. will be acquired by private equity firm Veritas Capital for approximately $17 billion represents a continuation of a trend that investors and traders have been waiting to see: PE firms continuing to gobble up big swathes of the US economy.

In the last 24 months, private equity firms have forked out more than $300 billion to acquire firms which focus on infrastructure, healthcare, and financial services. Among those acquired are Dow Chemical, Verizon, American Express, and Gilead Sciences.

Venture capital funding also has picked up. For a while, private equity and VC investors were hesitant to invest in startups that focused on everything from healthcare to robotics. But last year was the best year yet for investment. Since July 2016, venture capital dollars invested in healthcare startups has risen by more than 50% to $20.4 billion.

So far this year, more than half of all VC dollars are going toward healthcare startups.

Athenahealth is the next example. The company provides electronic health records, software and services to providers including Kaiser Permanente, Geisinger Health System, and much of the US Department of Veterans Affairs. The company will now become part of Veritas’ portfolio.

While a PE firm such as Veritas is typically associated with buyout deals, this purchase of Atrium by Athenahealth might indicate a shift in focus. In the last few years, many private equity firms have invested in healthcare-focused technology companies to ensure that their portfolio companies will thrive in an increasingly regulated healthcare system.

Vermitas will get to be the majority owner in a deal valued at approximately $17 billion. Veritas will acquire Atrium for $123.50 per share in cash – a premium of about 22.9% to the closing price on Friday, January 19, the day before reports of the deal emerged.

According to a Bloomberg report, some analysts think this is the beginning of a series of leveraged buyouts in the space that will soon include technology providers such as Cerner Corp. and Epic Systems Corp. Earlier this month, Reuters reported that Transamerica, Allscripts, and TriZetto were involved in discussions about a potential sale.

Today’s buyout announcement is something of a consolation prize to Atrium shareholders, because shares of the company had declined in the last year by more than 19%. A PE company might be able to raise the value of Atrium’s stock to take advantage of the increase in the valuation of the healthcare technology sector. In the meantime, Atrium’s employees have time to go out and sell the business to someone else. For now, however, its shareholders can be glad that the company is now a family-friendly one.

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