ExamWorks Group acquired by Leonard Green & Partners: fairness opinion by Evercore and Goldman Sachs
Deal terms
Implied value per share by method vs. $35.05 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Evercore to the special committee
Discounted cash flow assumptions
Mid-year convention; discounted to present value as of April 26, 2016. Unlevered free cash flow defined as non-GAAP EBITDA less stock-based compensation, taxes, changes in working capital and capex.
Selected public companies (7)
MEDNAX, Inc. · Envision Healthcare Holdings, Inc. · AmSurg Corp. · Team Health Holdings, Inc. · Aon plc · Verisk Analytics, Inc. · Genpact Ltd.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2016E Adjusted EBITDA | — | — | — | 10.0x–12.5x | $24.70–$33.98 |
| EV / 2017E Adjusted EBITDA | — | — | — | 9.0x–12.0x | $25.82–$38.55 |
Selected precedent transactions (19)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| — | Solera Holdings, Inc. | Vista Equity Partners | — |
| — | IPC Healthcare, Inc. | TeamHealth Holdings, Inc. | — |
| — | Hospital Physician Partners, Inc. | Onex Corp. | — |
| — | Virtual Radiologic Corp. | MEDNAX, Inc. | — |
| — | Emergency Medicine Physicians | Welsh Carson Anderson and Stowe | — |
| — | Vista Staffing Solutions, Inc. | Envision Healthcare Holdings, Inc. | — |
| — | Cogent Healthcare, Inc. | Fresenius Medical Care AG & Co. KGaA | — |
| — | Sound Physicians, Inc. | Fresenius Medical Care AG & Co. KGaA | — |
| — | Sheridan Healthcare, Inc. | AmSurg Corp. | — |
| — | Healogics Holding Corp. | Clayton Dubilier & Rice, LLC | — |
| — | One Call Care Management, Inc. | Apax Partners LLP | — |
| — | Mitchell International, Inc. | Kohlberg Kravis Roberts & Co. LP | — |
| — | CHG Healthcare Services Inc. | Leonard Green & Partners LP / Ares Management LLC | — |
| — | Emergency Medical Services Corp. | Clayton Dubilier & Rice, LLC | — |
| — | Nighthawk Radiology Holdings, Inc. | Virtual Radiologic Corp. | — |
| — | Virtual Radiologic Corp. | Providence Equity Partners | — |
| — | Sheridan Healthcare, Inc. | Hellman & Friedman LLC | — |
| — | Team Health, Inc. | Blackstone Group LP | — |
| — | Merritt Hawkins & Associates (f/k/a MHA Group) | AMN Healthcare Services, Inc. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM (ended 3/31/2016) Adjusted EBITDA | — | — | — | 11.0x–13.0x | $21.90–$28.13 |
| EV / CY2016E Adjusted EBITDA | — | — | — | 11.0x–13.0x | $28.41–$35.83 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Trading Range Analysis (52-week) | Low and high closing prices per share during 52-week period ended April 26, 2016; closing price of $33.57 on April 26, 2016. Not relied upon in reaching opinion. | $22.68–$44.09 |
| Present Value of Future Stock Price Analysis | Applied forward EV/EBITDA multiples of 9.0x-13.0x to estimated adjusted EBITDA for 2016, 2017 and 2018, subtracted net debt, divided by diluted share count, discounted back to April 26, 2016 at 9.4% cost of equity. | $21.79–$45.65 |
| Illustrative Leveraged Buyout Analysis | 6.5x leverage on LTM 6/30/2016E adjusted EBITDA ($675M term loan B plus $300M other debt); exit at 11.0x-13.0x LTM 6/30/2021E adjusted EBITDA with required IRR of 15.0%-20.0%. | $26.37–$36.75 |
| Equity Research Analysts' Price Targets | Range of published one-year forward analyst price targets as of April 26, 2016. | $28.00–$33.00 |
Opinion fee of $750,000 paid on delivery (creditable against success fee); success fee of 0.6% of equity consideration plus debt/capital lease/preferred obligations, estimated at approximately $13,080,000, contingent on closing. Evercore Senior Managing Director William Shutzer is an ExamWorks director and rollover investor; walled off from the deal team.
Opinion of Goldman Sachs to the target board
Discounted cash flow assumptions
Discounted to present value as of March 31, 2016; net debt as of 3/31/2016 adjusted for pending acquisitions. Midpoint value of $38.94 (7.5% discount rate, 3.5% perpetuity growth); sensitivity analysis on 2017-2021 revenue growth (+/-2% -> $(5.37)-$5.76), 2021 adjusted EBITDA margin (+/-2% -> $(6.55)-$6.55), no acquisitions ($(1.75)) and +2.0x acquisition multiple ($(1.37)). Free cash flow estimate of $35 million used for April 1 - December 31, 2016.
Selected public companies (7)
AmSurg Corp. · MEDNAX, Inc. · TeamHealth, Inc. · Envision Healthcare Holdings, Inc. · Verisk Analytics, Inc. · Genpact Limited · Aon plc
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / 2016E EBITDA - Healthcare Outsourcing Companies | 10.1x | 11.4x | 11.6x | 10.0x–14.0x | $25.03–$39.87 |
| EV / 2017E EBITDA - Healthcare Outsourcing Companies | 9.0x | 10.2x | 10.5x | — | — |
| EV / 2016E EBITDA - Business Process Outsourcing/Payor and Insurance Services Companies | 12.6x | 14.2x | 15.1x | — | — |
| EV / 2017E EBITDA - Business Process Outsourcing/Payor and Insurance Services Companies | 11.8x | 12.9x | 13.9x | — | — |
Selected precedent transactions (19)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2015-09-13 | Solera Holdings, Inc. | Vista Equity Partners | 14.1x EV / LTM EBITDA |
| 2015-08-04 | IPC Healthcare, Inc. | Team Health Holdings, Inc. | 20.1x EV / LTM EBITDA |
| 2015-08-04 | Hospital Physician Partners, Inc. | Onex Corporation | — |
| 2015-05-12 | Virtual Radiologic Corp. | MEDNAX, Inc. | 11.1x EV / LTM EBITDA |
| 2015-04-13 | Emergency Medicine Physicians, Ltd. | Welsh, Carson, Anderson & Stowe | — |
| 2015-01-19 | VISTA Staffing Solutions, Inc. | Envision Healthcare Holdings, Inc. | 9.9x EV / LTM EBITDA |
| 2014-11-13 | Cogent Healthcare Inc. | Sound Inpatient Physicians, Inc. (parent: Fresenius Medical Care AG & Co. KgaA) | — |
| 2014-06-28 | Sound Inpatient Physicians, Inc. | Fresenius Medical Care AG & Co. KgaA | — |
| 2015-05-29 | Sheridan Healthcare, Inc. | AmSurg Corp. | 12.2x EV / LTM EBITDA |
| 2014-05-21 | Healogics, Inc. | Clayton, Dubilier & Rice, Inc. | 10.1x EV / LTM EBITDA |
| 2013-10-25 | One Call Care Management, Inc. | Apax Partners LLP | 14.2x EV / LTM EBITDA |
| 2013-09-05 | Mitchell International, Inc. | KKR & Co. L.P. | 11.5x EV / LTM EBITDA |
| 2012-10-22 | CHG Healthcare Services, Inc. | Ares Private Equity Group; Leonard Green & Partners, L.P. | 12.5x EV / LTM EBITDA |
| 2011-02-14 | Emergency Medical Services Corporation | Clayton, Dubilier & Rice, Inc. | 9.7x EV / LTM EBITDA |
| 2010-09-27 | NightHawk Radiology Holdings, Inc. | Virtual Radiologic Corporation | 8.7x EV / LTM EBITDA |
| 2010-05-17 | Virtual Radiologic Corporation | Providence Equity Partners LLC | 11.5x EV / LTM EBITDA |
| 2007-05-21 | Sheridan Healthcare, Inc. | Hellman & Friedman LLC | 12.1x EV / LTM EBITDA |
| 2005-10-12 | TeamHealth, Inc. | The Blackstone Group L.P. | 8.7x EV / LTM EBITDA |
| 2005-10-05 | The MHA Group, Inc. | AMN Healthcare Services, Inc. | 11.0x EV / LTM EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA | 8.7x | 11.5x | 20.1x | 9.0x–14.0x | $16.03–$32.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Implied Premia and Multiple Analysis | Merger consideration of $35.05 implied premia of 4% to the 4/26/2016 close of $33.57, 17% to the 3/4/2016 close of $30.01, 37% to the 2/5/2016 close of $25.61, 12% to the 30-day VWAP of $31.35, 22% to the 90-day VWAP of $28.74 and a (21)% discount to the 52-week high of $44.33. Implied transaction EV multiples: 14.9x LTM adj. EBITDA, 12.7x 2016E and 11.1x 2017E adj. EBITDA (Forecasts); 12.7x 2016E and 11.9x 2017E (Wall Street consensus). | — |
| Illustrative Present Value of Future Stock Price Analyses | Applied one-year forward EV/adjusted EBITDA multiples of 9.0x-14.0x to Forecast adjusted EBITDA as of 3/31/2016 and 1/1/2017 through 1/1/2021, less estimated net debt, divided by estimated fully diluted shares, discounted to 3/31/2016 at 7.8% cost of equity. | $21.79–$61.24 |
Aggregate fee estimated at approximately $13,080,000; $12,330,000 (approx. 0.6% of equity value) contingent on consummation and $750,000 opinion fee paid on delivery. Goldman received approx. $0.3 million from ExamWorks and approx. $53.2 million from Leonard Green and its affiliates/portfolio companies in the prior two years.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.1B | $1.2B | $1.3B | $1.4B | $1.5B | 8.1% |
| Revenue growth | 11.3% | 8.5% | 8.3% | 7.9% | 7.7% | |
| EBITDA | $196M | $217M | $238M | $260M | $285M | 9.7% |
| EBITDA growth | 14.5% | 10.2% | 9.9% | 9.4% | 9.5% | |
| EBITDA margin | 18% | 19% | 19% | 19% | 19% | |
| Implied EV / EBITDA | 10.1x | 9.1x | 8.3x | 7.6x | 6.9x |
Year-1 growth is against LTM at announcement ($962M revenue, $172M EBITDA); later years are year over year.
Management prepared non-public forecasts covering 2016 through 2021 (with quarterly detail for 2016), which were provided to the Special Committee, the Board, Goldman Sachs, Evercore and prospective bidders. Total revenue grows from $962.3 million in 2016 to $1,462.8 million in 2021 (10.1% CAGR including acquisitions; 7.7% organic), with Adjusted EBITDA rising from $171.6 million (17.8% margin) in 2016 to $284.9 million (19.5% margin) in 2021 (12.5% CAGR). Unlevered free cash flow was projected at $49 million in 2016 rising to $93 million in 2021; assumptions include $25 million of annual acquisition spend 2017-2021 at an illustrative 6.0x EV/EBITDA multiple, no dividends, and roughly $300 million of share repurchases in 2018-2021.
Process notes
Other Physician Groups fairness opinions
- Network Medical Management / Apollo Medical Holdings 2016 · 9.5x EV/EBITDA
- Team Health Holdings / Blackstone 2016 · 11.5x EV/EBITDA
- Envision Healthcare Holdings / AmSurg 2016 · 11.2x EV/EBITDA
- USMD Holdings / WellMed Medical Management 2016 · 15.5x EV/EBITDA
- IPC Healthcare / TeamHealth 2015 · 22.5x EV/EBITDA
- Envision Healthcare Holdings / KKR 2018 · 10.0x EV/EBITDA
All Physician Groups opinions → · Evercore opinions · Goldman Sachs opinions