Sign of strength for health tech industry, private equity firms acquire Athenahealth for $ 17 billion

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“It’s a real blow in the arm,” Segert said of the acquisition. “It’s about growth. It’s about expanding our capabilities and creating more value in the [health care] ecosystem.

The buyout consolidates Athenahealth as one of the region’s largest healthcare technology companies. The local cluster also includes companies like Devoted Health, Waltham’s health insurance startup, which recently raised $ 1.2 billion in funding; PathAI, a Boston-based pathology tech startup that purchased a network of labs under an eight-figure deal over the summer; and CarePort, a healthcare software company that streamlines post-hospital stays and was acquired for $ 1.35 billion last year.

Athenahealth was founded in 1997 by Jonathan Bush, nephew of former President George HW Bush, and Todd Park, who later served as US CTO. In its early days, the company focused on making it easier for physicians to plan and bill for their services. It later expanded to offer telehealth and other online services, including a drug information phone app called Epocrates. Along the way, Athenahealth raised $ 113 million in an initial public offering in 2007.

In 2017, activist investor Elliott Management Corp. bought a 9.2% stake in the company. Soon after, he made a $ 6.4 billion offer to acquire the company, which Bush resisted. In 2019, Veritas Capital and Evergreen Coast Capital – Elliott’s private equity arm – privatized the company for $ 5.7 billion. The sale follows a bitter campaign centered on Bush, who resigned as CEO in 2018 following allegations in years-old court documents that he assaulted his ex-wife. Bush publicly apologized in 2018.

Veritas and Evergreen merged Athenahealth with Virence Health, a healthcare IT company that was previously part of GE Healthcare, in 2019. As part of the deal, Segert, who was CEO of Virence, took over as CEO of Virence. Athenahealth. Today, the company has grown its healthcare platform to serve more than 140,000 ambulatory care providers in all 50 states and in more than 120 medical specialties, according to company officials. Athenahealth has around 6,300 employees, Segert said, and plans to hire more in the coming year.

Segert said the company will expand into chronic care management, use the data provided by its platform to identify gaps in patient care, and work to facilitate referrals for healthcare providers and providers. insurers.

Under the new deal, the current owners will retain a minority stake in the company, officials said. New investors, including GIC, the Singapore sovereign wealth fund, and a subsidiary of the Abu Dhabi Investment Authority will also join us. Evercore and Goldman Sachs are the acquisition’s primary financial advisers.

Devin O’Reilly, managing director of Bain Capital which oversees its healthcare portfolio, said Bain executives have been watching Athenahealth closely for years and have long admired it. In fact, Bain considered teaming up with Evergreen Coast Capital to buy the health IT company in 2018, he said, but valuations in the bidding process were getting too high for Bain to. the time.

O’Reilly said Athenahealth is now much more valuable for several reasons, including the focus on its core business of electronic medical records and long-term trends in the healthcare industry that indicate the need for its software. He said it would be the largest healthcare company in Bain’s portfolio.

“They did a really good job focusing on this great core business,” said O’Reilly. “They have been very successful in gaining market share and further developing the product… over the past few years. “

Michael Greeley, co-founder and general partner of investment firm Flare Capital Partners, said the pandemic played a pivotal role in selling Athenahealth to three times what it was two years ago.

“The health system had to become virtual, on demand, [and] smart within two years. The only way to do this is to use cutting edge technology, ”he said. “Athenahealth sits in the middle of all this infrastructure to enable that. (Greeley is not involved in the business.)

He added that it is likely that this acquisition will allow Athenahealth to return to the stock market in the future, with a valuation that could skyrocket. “They invest thinking they’re going to make two to three times their money,” he said of Bain Capital and Hellman & Friedman. “There is the belief that there is a $ 50 billion business here.”

Greeley said the acquisition shows the strength of Greater Boston in the healthcare technology sector, which could have a ripple effect on the region for years to come.

“It just strengthens Boston as a really big market for healthcare technology,” he said. “Once that business is sort of sold or made public… executives become angel investors, mid-level managers become entrepreneurs. So there is only a very nice regenerative effect of this kind of success story. “

Jon Chesto of Globe staff contributed to this report.


You can reach Pranshu Verma at [email protected] Follow him on twitter @pranshuverma_.

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