Press Ganey In Secondary Deal

American Securities Capital Partners agreed to sell a controlling stake in South Bend, Ind.-based healthcare research firm Press Ganey Associates to fellow private equity firm Vestar Capital Partners, through a deal that gives company management a bigger share of ownership.

Press Ganey chief executive Melvin Hall confirmed management will hold a bigger stake following the deal, but declined specifics. Overarching terms of the deal, including total purchase price, the equity split and American Securities' return on investment, were being held close to the vest by all involved.

Likewise, terms weren't disclosed back when New York-based American Securities first acquired Press Ganey over four years ago in October 2003, although The Deal estimated the original price tag at around $100 million based on sources.

"We've had phenomenal success because the returns have been good," said American Securities managing director Glenn Kaufman. "We've helped a team build a better company and we built really great long-term relationships. For us, that's the trifecta."

For Press Ganey, the move keeps them in private hands, and while Hall doesn't rule out going public sometime in the future, he said staying private is what's best for the company right now.

"We can have the kind of capital we need to continue to grow," Hall said. "It allows us to think long term as opposed to quarter by quarter. We can plan for long-term growth and make the capital expenditures we need to make to position ourselves for the long term."

Hall said the relationship with American Securities allowed for a heavy investment in information technology infrastructure, investments in public policy, and the aggressive courtship of talent.

American Securities' exit, Kaufman explained, was determined along with Hall and it was timed so it wasn't intrusive to Press Ganey's business.

"The company has been growing rapidly," Kaufman said. "It has built its presence continuously in their traditional business area and has begun to penetrate a significant number of additional market spaces. Our view was that we shouldn't exit the business at a time when the company is beginning the launch of one of its new product lines."

Kaufman had served as chairman of Press Ganey, but will step down following the transaction.

Press Ganey, founded in 1985, conducts and analyzes satisfaction surveys, which are used by about 7,000 healthcare agencies nationwide, including 40% of hospitals, according to the company's website.

Kaufman said ancillary healthcare companies like Press Ganey stand to benefit as the overall industry pays more attention to customer service.

"There is a move towards consumer-driven healthcare that empowers consumers to make decisions," Kaufman said, yet still provides for payors. "[Healthcare] has to provide the best possible product at the lowest possible price. It's basic economics, applied in most industries forever, but has recently been considered a breakthrough in healthcare for the past decade."

Vestar Capital recently targeted the sector in October 2007, when it acquired Radiation Therapy Services. Vestar, also headquartered in New York, offered to take the chain of radiation therapy centers private for $763.8 million. The two buys would bring Vestar's healthcare portofio to seven companies, including National Mentor Holdings, DynaVox Systems and Essent Healthcare.

Calls to Vestar seeking comment were not immediately returned.

Both the Radiation Therapy and the Press Ganey deals are expected to close during the first quarter of 2008.