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Medical-Technology Pioneer Athenahealth Set to be Sold in a $17bn Private-Equity Deal

Updated: Oct 30, 2023



Acquisition Overview


The private-equity companies Bain Capital and Hellman & Friedman (H&F) are set to buy the US healthcare-technology firm Athenahealth in a $17bn transaction. The deal, which will be financed with a mixture of debt and equity, is also one of the largest leveraged buyouts of 2021. The strategic rationale for the acquisition includes providing Athenahealth with a platform to drive the next phase of its growth journey, Bain and H&F’s ability to capitalise on the company’s technological leadership through applying their sector-specific experience, and also the precedent set by successful changes implemented to Athenahealth’s operatrations under its previous owners.


Deal structure


Hellman & Friedman and Bain capital are leading an investor group in purchasing Athena health in this $17bn transaction. The investment is expected to be completed in the first quarter of 2022, provided that regulatory approvals and customary closing conditions are met. The deal is set to be financed with $7bn in equity, with H&F set to hold a greater proportion of the equity in Athenahealth despite having equal board representation with Bain Capital.


Evercore and Goldman Sachs were the lead financial advisors to Veritas Capital, while Deutsche Bank Securities Inc., Barclays, Morgan Stanley & Co. LLC., BMO Capital Markets, BofA Securities, Inc. and J.P. Morgan Securities LLC served as financial advisors to Bain Capital and Hellman & Friedman.


Athenahealth Overview


The company develops healthcare technologies which connect patients, clinicials, partners and payers in a number of ways. Its management of revenue cycles, online health records as well as patient-engagement tools enable Athenahealth to deliver better-quality care to its customers. The business’ broader vision is to develop an ecosystem which provides sustainable and accessible healthcare for all.


Hellman & Friedman Overview


Hellman & Friedman is an international private-equity firm which was founded in 1984. The firm specialises in large-scale equity investments into businesses exhibiting high-quality growth. The company aims to consider targets in industries including financial services, software and technology, consumers & retail, healthcare and other business services. Currently, the firm boasts $95bn in assets under management as of 30th September 2021, and is investing in its tenth fund.


Bain Capital Overview


Also founded in 1984, Bain Capital collaborates with management teams to provide them with a broad set of strategic resources. The private-equity division of Bain Capital has a global team of 275 investment professionals and creates value for the portfolio companies which it invests in through its international platform, and its depth of expertise in vertical industries such as technology and healthcare.

Industry Insight


A key macroeconomic trend to note may be the diverse effects of Covid-19 on dealmaking in the healthcare sector. Indeed, elective and preventative care was dropped or delayed and orthodox clinical-processes were put on hold as the pandemic profoundly disrupted the broader healthcare ecosystem. Although this may have spurred dealmaking in the short term as companies aimed to acquire the capacity to meet the demand for particular health equipment used for the treatment of COVID 19 such as ventilators, demand for many of such products declined quickly and thus may have only influenced M&A activity in the short term.


Another fundamental trend to consider is the role of technology in buttressing telehealth, modernising administration as well as helping patients to make more-informed decisions. The transition towards alternative sites of care in 2020 may be illustrated by the fact that the number of virtual healthcare visits in the US are likely to have reached an astounding one billion in 2020 according to analysts Forrester, an advisory and research firm.


Furthermore, artificial intelligence as well as data are likely to drive the shift to fairer healthcare coverage and insurance. Due to the proliferation in the amount of data which is collected from interaction with smart devices such as phones as well as virtual-health activities, providers are developing a growingly accurate picture of when and where intervention may be required.


Strategic rationale


There are arguably three key factors driving said $17bn transaction.


First is the ability of the deal to facilitate Athenahealth’s next phase of its growth journey. Indeed, the chairman and CEO of the company declared that the transaction would enable the development of an ecosystem which provides accessible, high-quality and sustainable healthcare for all its parties. Such an assertion may be understandable given H&F’s experience in healthcare in software and thus its ability to create the foundations for a multifaceted digital-care network between payer, patient, and provider while also rapidly scaling the business.


With regards to why Bain and H&F may wish to acquire Athenahealth, the company’s technological leadership and the fact that its acquisition would sustain H&F’s strategy of expanding its healthcare portfolio should be considered. It is arguably due to the fact that Athenahealth differentiates itself as a cloud-based software-as-a-service technology platform and delivers preventive care to approximately 20% of the US population is why it is such an attractive target to H&F. Indeed, due to its existing positioning in this market, Athenahealth is likely positioned to be able to support physicians in the growing shift towards value-based care and hence generate returns for H&F. The transaction is also likely to align with Bain’s recent strategy of augmenting its exposure to healthcare. Indeed, as Bain Capital’s acquisition of a medtech supply-chain firm PartsSource in July 2021 for $1.25bn may suggest, the company is aiming to expand its presence in this sector and potentially due to its ability to leverage its experience in operating within vertical industries such as healthcare and software. Thus, adding Athenahealth to its portfolio will enable Bain to keep pursuing this strategy.


Lastly, other private-equity firms’ previous successful experiences in implementing changes at Athenahealth since 2019 would also suggest the deal may be lucrative for Bain and H&F. The fact that Veritas Capital and Evergreen Coast Capital, after they took Athenahealth private in 2019 for $5.7bn, were able to raise R&D and lower costs across its healthcare ecosystem may attest to this idea of there being potential to further optimise business operations and thus generate profit growth. More broadly, the acquisition arguably reflects investors’ conviction that Athenahealth is able to sustain its double-digit rate of revenue growth while winning customers in markets for electronic medical records among independent practices and physicians in particular, given that the company’s main competitor (Epic Systems) dominates the hospital market.


Long-term prospects


A potential secular prospect of the transaction is to enable Athenahealth to expand the scope of its platform and operations. Due to its current extensive network which enables it to provide enterprise cloud software for more than 140,000 healthcare providers in all 50 US states, the company arguably already possesses the foundation from which to expand beyond small physician practices and large health systems which it currently serves under its new ownership.


Written by Harinda De Silva.

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