Athenahealth acquired by Veritas Capital / Evergreen Coast Capital: fairness opinion by Centerview Partners and Lazard
Announced November 12, 2018 · One-step merger · All cash ·
DEFM14A filed December 21, 2018
Digital / HealthTech PM / EMR Sponsor: Veritas Capital Fund Management, L.L.C. / Elliott Management Corporation (Evergreen Coast Capital)
Enterprise value
$5.7B
EV / LTM EBITDA
15.5x
EBITDA $368M · 27% margin
EV / LTM revenue
4.24x
revenue $1.3B
DCF discount rate
10.5%–12.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$135.00
Premium—
Premium basis—
StructureOne-step merger
Termination fee$142M
Reverse termination fee$313M
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $135.00 offer
Selected companies — EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) (Centerview Partners) $109.00 – $129.00
Selected companies — EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) (Centerview Partners) $103.00 – $122.00
Precedent transactions — EV / LTM EBITDA (LTM EBITDA $374mm for period ended 9/30/2018) (Centerview Partners) $126.00 – $152.00
Discounted cash flow (Centerview Partners) $121.00 – $148.00
52-Week Historical Trading Range (for informational purposes) (Centerview Partners) $101.00 – $156.00
Wall Street Analyst Price Targets (for informational purposes) (Centerview Partners) $128.00 – $180.00
Selected companies — EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) (Lazard) $109.00 – $129.00
Selected companies — EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) (Lazard) $103.00 – $122.00
Precedent transactions — EV / LTM EBITDA (LTM EBITDA $374mm for period ended 9/30/2018) (Lazard) $126.00 – $152.00
Precedent transactions — EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) (Lazard) $134.00 – $164.00
Precedent transactions — EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) (Lazard) $126.00 – $155.00
Discounted cash flow (Lazard) $125.00 – $151.00
52-Week High/Low Trading Prices (Lazard) $101.00 – $156.00
Research Analyst Price Targets (Lazard) $128.00 – $180.00
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Centerview Partners to the target board
Delivered November 11, 2018 · Fee $21.0M, $3.0M on delivery of the opinion
Discounted cash flow assumptions
Discount rate10.5%–12.0%
BasisCenterview's analysis of the Company's weighted average cost of capital; mid-year convention
Terminal valueExit multiple
Perpetuity growth—
Exit multiple10.5x–12.5x EV / forward EBITDA as of December 31, 2022
Projection periodQ4 2018 (Oct 1, 2018) - 2022
Projections usedForecasts prepared by Company management and approved by the Board (Adjusted Management Model)
Implied value per share$121.00–$148.00
Added net cash as of September 30, 2018; divided by fully diluted shares as of November 8, 2018.
Selected public companies (7)
Cerner Corporation · Allscripts Healthcare Solutions, Inc. · NextGen Healthcare, Inc. · Computer Programs & Systems, Inc. · HMS Holdings Corp. · Inovalon Holdings Inc. · Evolent Health Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) | — | 11.5x | — | 10.5x–12.5x | $109.00–$129.00 |
| EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) | — | 11.5x | — | 10.5x–12.5x | $103.00–$122.00 |
| EV / NTM EBITDA - Selected EHR Vendor Companies | 9.2x | 10.8x | 11.9x | — | — |
| EV / NTM EBITDA - Selected HCIT Vendor Companies | 13.2x | 16.9x | 20.7x | — | — |
Selected precedent transactions (19)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2018-06 | Cotiviti Holdings, Inc. | Verscend Technologies, Inc. | 18.0x EV / LTM EBITDA |
| 2018-04 | GE's HCIT Business | Veritas Capital | — |
| 2018-03 | ABILITY Network Inc. | Inovalon Holdings, Inc. | 16.6x EV / LTM EBITDA |
| 2018-02 | Flatiron Health, Inc. | Roche Holding AG | — |
| 2017-10 | eviCore healthcare | Express Scripts Holding Company | 13.6x EV / LTM EBITDA |
| 2017-07 | Certara | EQT | — |
| 2017-01 | CoverMyMeds LLC | McKesson Corporation | — |
| 2016-08 | Press Ganey Holdings, Inc. | EQT | 17.5x EV / LTM EBITDA |
| 2016-04 | Verisk's Health-Analytics Unit | Veritas Capital | 10.0x EV / LTM EBITDA (utilized 2015 EBITDA) |
| 2016-03 | Netsmart Technologies, Inc. | Allscripts Healthcare Solutions, Inc. / GI Partners | — |
| 2016-02 | Brightree LLC | ResMed Inc. | 18.6x EV / LTM EBITDA (utilized 2016 EBITDA) |
| 2016-02 | Truven Health Analytics | IBM Watson Health | 16.9x EV / LTM EBITDA |
| 2015-11 | MedAssets, Inc. | Pamplona Capital Management | 11.5x EV / LTM EBITDA |
| 2015-08 | Merge Healthcare Incorporated | International Business Machines Corporation | 19.0x EV / LTM EBITDA |
| 2015-07 | Altegra Health, Inc. | Emdeon Inc. | 15.5x EV / LTM EBITDA |
| 2014-09 | TriZetto Corporation | Cognizant Technology Solutions Corporation | — |
| 2014-08 | Siemens Health Services | Cerner Corporation | 10.5x EV / LTM EBITDA |
| 2013-11 | Passport Health Communications, Inc. | Experian plc | 20.3x EV / LTM EBITDA |
| 2013-09 | Greenway Medical Technologies, Inc. | Vista Equity Partners | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (LTM EBITDA $374mm for period ended 9/30/2018) | — | 16.8x | — | 14.0x–17.0x | $126.00–$152.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-Week Historical Trading Range (for informational purposes) | Historical closing trading prices during the 52-week period ended May 4, 2018 (last full trading day prior to Elliott's public $160 per share proposal) ranged from approximately $101.00 to $156.00 per share. | $101.00–$156.00 |
| Wall Street Analyst Price Targets (for informational purposes) | Publicly available Wall Street research analyst stock price targets ranged from $128.00 to $180.00 per share. | $128.00–$180.00 |
Aggregate fee of approximately $21 million; $3 million payable upon rendering of the opinion, $7.5 million payable upon the earlier of July 18, 2019 and consummation of the Merger, and the remainder contingent upon consummation of the Transaction.
Opinion of Lazard to the target board
Delivered November 11, 2018 · Fee $21.0M ($18.0M contingent on closing), $3.0M on delivery of the opinion
Discounted cash flow assumptions
Discount rate10.0%–11.0%
BasisLazard's estimated range of the Company's weighted average cost of capital based on average unlevered risk profiles, weighted after-tax cost of debt and consolidated leverage ratios of the comparable companies
Terminal valueExit multiple
Perpetuity growth5.3%–7.1%
Exit multiple10.5x–12.5x terminal year EBITDA (2022)
Projection period2018-2022 (cash flows from October 1, 2018 through December 31, 2022)
Projections usedCompany management forecasts (Adjusted Management Model) as set forth in Certain Financial Projections Utilized in Connection with the Merger
Implied value per share$125.00–$151.00
Implied enterprise value range of $5,220 - $6,300 million; consolidated net cash added to derive equity value; implied perpetuity growth rate range of 5.3% to 7.1%.
Selected public companies (13)
Cerner · Allscripts Healthcare Solutions · NextGen Healthcare · Computer Programs & Systems · HMS Holdings · Inovalon Holdings · Evolent Health · RealPage · Medidata Solutions · Blackbaud · Ebix · SPS Commerce · HealthStream
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) | 9.2x | 14.6x | 26.6x | 10.5x–12.5x | $109.00–$129.00 |
| EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) | 9.2x | 14.6x | 26.6x | 10.5x–12.5x | $103.00–$122.00 |
| EV / NTM EBITDA - EHR Companies | 9.2x | 10.8x | 11.9x | — | — |
| EV / NTM EBITDA - Other HCIT Companies | 13.2x | 16.9x | 20.7x | — | — |
| EV / NTM EBITDA - Vertical SaaS Companies | 11.5x | 19.4x | 26.6x | — | — |
Selected precedent transactions (26)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2018-06 | Cotiviti Holdings | Verscend Technologies | 18.0x EV / LTM EBITDA (NTM 15.9x) |
| 2018-04 | GE's HCIT Business | Veritas Capital | 10.5x EV / NTM EBITDA |
| 2018-03 | ABILITY Network | Inovalon | 16.6x EV / LTM EBITDA (NTM 16.0x) |
| 2018-02 | Flatiron Health | Roche | — |
| 2017-10 | eviCore healthcare | Express Scripts | 13.7x EV / LTM EBITDA (NTM 13.1x) |
| 2017-07 | Certara | EQT | — |
| 2017-01 | CoverMyMeds | McKesson | — |
| 2016-08 | Press Ganey Holdings | EQT | 17.5x EV / LTM EBITDA (NTM 15.3x) |
| 2016-04 | Verisk's Health-Analytics Unit | Veritas Capital | 10.7x EV / LTM EBITDA (NTM 8.3x) |
| 2016-03 | Netsmart Technologies | Allscripts Healthcare Solutions/GI Partners | 12.7x EV / NTM EBITDA |
| 2016-02 | Brightree | ResMed | 18.6x EV / LTM EBITDA (NTM 18.2x) |
| 2016-02 | Truven Health Analytics | IBM Watson Health | 16.9x EV / LTM EBITDA |
| 2015-11 | MedAssets, Inc. | Pamplona Capital Management | 11.5x EV / LTM EBITDA (NTM 11.0x) |
| 2015-08 | Merge Healthcare | IBM Watson Health | 19.0x EV / LTM EBITDA (NTM 16.8x) |
| 2015-07 | Altegra Health | Emdeon | 15.4x EV / LTM EBITDA |
| 2014-09 | TriZetto Corporation | Cognizant | 14.2x EV / LTM EBITDA |
| 2014-08 | Siemens Health Services | Cerner | 10.5x EV / LTM EBITDA |
| 2013-11 | Passport Health Communications | Experian | 20.3x EV / LTM EBITDA |
| 2013-09 | Greenway Medical Technologies | Vista Equity Partners | — |
| 2018-03 | CommerceHub | GTCR / Sycamore Partners | 23.1x EV / LTM EBITDA (NTM 19.9x) |
| 2016-12 | Intralinks Holdings | Synchronoss Technologies | 17.5x EV / LTM EBITDA (NTM 13.0x) |
| 2016-08 | Fleetmatics Group | Verizon Communications | 24.0x EV / LTM EBITDA (NTM 19.8x) |
| 2015-09 | Solera Holdings | Vista Equity Partners | 14.2x EV / LTM EBITDA (NTM 12.8x) |
| 2015-06 | Dealertrack Technologies | Cox Automotive | 22.4x EV / LTM EBITDA (NTM 19.1x) |
| 2013-12 | Digital Insight | NCR | 15.7x EV / LTM EBITDA (NTM 15.1x) |
| 2013-09 | ACTIVE Network | Vista Equity Partners | 18.6x EV / LTM EBITDA (NTM 15.7x) |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (LTM EBITDA $374mm for period ended 9/30/2018) | 10.5x | 16.9x | 24.0x | 14.0x–17.0x | $126.00–$152.00 |
| EV / NTM EBITDA (Adjusted Management Model, NTM EBITDA $430mm) | 8.3x | 15.2x | 19.9x | 13.0x–16.0x | $134.00–$164.00 |
| EV / NTM EBITDA (Wall Street consensus, NTM EBITDA $405mm) | 8.3x | 15.2x | 19.9x | 13.0x–16.0x | $126.00–$155.00 |
| EV / LTM EBITDA - HCIT Companies | 10.5x | 16.6x | 20.3x | — | — |
| EV / LTM EBITDA - Vertical SaaS Companies | 14.2x | 18.6x | 24.0x | — | — |
| EV / NTM EBITDA - HCIT Companies | 8.3x | 14.2x | 18.2x | — | — |
| EV / NTM EBITDA - Vertical SaaS Companies | 12.8x | 15.7x | 19.9x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| 52-Week High/Low Trading Prices | Closing share prices for the 52 weeks ended May 4, 2018 (last full trading day prior to Elliott's public $160 per share proposal) ranged from $101.00 to $156.00 per share. | $101.00–$156.00 |
| Research Analyst Price Targets | Wall Street equity research price targets published prior to November 9, 2018 ranged from $128.00 to $180.00 per share (forward targets, not discounted back); Lazard noted these were impacted by Elliott's public proposal and press speculation regarding a sale. | $128.00–$180.00 |
Aggregate fee of approximately $21 million; $3 million payable upon delivery of Lazard's opinion and approximately $18 million upon consummation of the Merger. Lazard received approximately $1 million in advisory fees from the Company during the prior two years.
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.4B | $1.5B | $1.7B | $1.9B | $2.1B | 10.7% |
| Revenue growth | 6.1% | 8.4% | 9.6% | 11.4% | 13.4% | |
| EBITDA | $450M | $531M | $608M | $696M | $823M | 16.3% |
| EBITDA growth | 22.3% | 18.0% | 14.5% | 14.5% | 18.2% | |
| EBITDA margin | 32% | 34% | 36% | 37% | 38% | |
| Implied EV / EBITDA | 12.7x | 10.7x | 9.4x | 8.2x | 6.9x |
Year-1 growth is against LTM at announcement ($1.3B revenue, $368M EBITDA); later years are year over year.
Both Centerview and Lazard used the Company management "Adjusted Management Model" forecasts (referred to as the "Forecasts"), approved by the Board, covering unlevered free cash flows from October 1, 2018 through December 31, 2022. NTM EBITDA of $430 million was derived from the Adjusted Management Model (versus $405 million from Wall Street research analyst consensus), and LTM EBITDA for the period ended September 30, 2018 was $374 million. Terminal value was based on estimated forward EBITDA as of December 31, 2022.
Process notes
Two financial advisors, Centerview Partners and Lazard, each delivered a separate written fairness opinion to the athenahealth Board on November 11, 2018; each was paid an aggregate fee of approximately $21 million with $3 million payable upon delivery of its opinion. Elliott Management, a stockholder of the Company, was also part of the buyer group (through Evergreen Coast Capital), and had made a public proposal to acquire the Company at $160 per share on May 7, 2018 (last full trading day prior was May 4, 2018). Both banks used the same 'Adjusted Management Model' forecasts; Lazard disclosed prior advisory services to the Company (~$1 million in fees) and to two companies in which Elliott holds interests.
Other Digital / HealthTech fairness opinions
- Cotiviti / Verscend Technologies 2018 · 16.3x EV/EBITDA
- Connecture / Francisco Partners 2018
- Medidata Solutions / Dassault Systemes 2019 · 32.4x EV/EBITDA
- WebMD / Internet Brands 2017 · 11.9x EV/EBITDA
- HMS / Gainwell Technologies 2020 · 18.4x EV/EBITDA
- Livongo Health / Teladoc Health 2020 · 155.5x EV/EBITDA
All Digital / HealthTech opinions → · Centerview Partners opinions · Lazard opinions