Middle market private equity firm GI Partners and Allscripts Healthcare Solutions Inc. (Nasdaq: MDRX) have teamed up to acquire health care software provider Netsmart Technologies Inc. from Genstar Capital in a $950 million deal. Allscripts will merge Netsmart with its homecare software business and will operate the target through a joint venture with GI.
Netsmart, founded in 1968 and based in Overland Park, Kansas, provides health care software to more than 20,000 organizations. Its technology is designed to help providers manage electronic medical records, billing and patient care. Netsmart’s clients include behavioral health facilities and public health departments.
“Given our combined significant experience in the health care and technology sectors, GI is the ideal partner to add value to the full combined Netsmart Business,” says GI managing director Howard Park. Gi has invested in at least one other health care technology company in Montreal-based Logibec.
Genstar invested in Netsmart in 2010. Under Genstar’s ownership Netsmart has made a handful of add-on acquisitions including: Behavioral Pathway Systems in 2012; Trend Consulting Services in 2015 and Lavender & Wyatt Systems also in 2015. Genstar recently announced plans to sell patient data provider to Nordic Capital.
Allscripts will be the majority owner of the joint venture by contributing about $70 million in cash. The JV will be led by Netsmart CEO Mike Valentine. Allscripts expects the transaction to add about $150 million in revenue in 2016.
Medical software companies continue to receive buyer interest. IBM (NYSE: IBM) has agreed to purchase Truven Health Analytics; LLR Partners acquired a stake in Phreesia Payment Services as part of a $30 million investment; and Thoma Bravo LLC has purchased MedeAnalytics. For more on M&A in the space, see Health Care Data Providers Are Becoming Attractive Targets, Thanks to the Affordable Care Act.
Houlihan Lokey Inc. (NYSE: HLI) and UBS Investment Bank are advising GI and Allscripts. JP Morgan (NYSE: JPM) and William Blair are advising Netsmart. UBS is providing financing.