Tabula Rasa HealthCare acquired by Nautic Partners / ExactCare Pharmacy: fairness opinion by Goldman Sachs
Deal terms
Implied value per share by method vs. $10.50 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Discounted cash flow assumptions
Mid-year convention; discounted to present value as of June 30, 2023; net debt as of June 30, 2023 subtracted and net present value of cash tax savings from federal NOLs added; fully diluted shares using treasury stock method.
Selected precedent transactions (5)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2022-06 | Convey Health Solutions Holdings, Inc. | TPG Inc. | 16.0x EV / LTM EBITDA |
| 2021-08 | Inovalon | Nordic Capital / Insight Partners | 29.0x EV / LTM EBITDA |
| 2020-12 | HMS Holdings Corp. | Gainwell Acquisition Corp. | 21.1x EV / LTM EBITDA |
| 2018-06 | Cotiviti Holdings, Inc. | Verscend Technologies, Inc. | 18.0x EV / LTM EBITDA |
| 2015-05 | Omnicare, Inc. | CVS Health Corporation | 17.7x EV / LTM EBITDA |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM EBITDA (applied to estimated 2023 adjusted EBITDA) | 16.0x | 18.0x | 29.0x | 16.0x–29.0x | $3.00–$12.83 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Stock Trading Analysis | Reviewed historical trading prices/volumes for the one-year period ended August 3, 2023. $10.50 implied premiums of 33% to the $7.88 current share price, 19% to the $8.81 52-week high, 229% to the $3.19 52-week low, 26% to the $8.36 30-day VWAP, 39% to the $7.57 60-day VWAP and 53% to the $6.85 90-day VWAP. | $3.19–$8.81 |
| Premia Paid Analysis | Reviewed acquisition premia for all-cash acquisitions of U.S. public company targets announced January 1, 2018 through August 3, 2023 with disclosed enterprise values below $1.0 billion (excluding premia greater than 300%). Median premium 42.0%; 25th percentile 21.0%; 75th percentile 66.8%. Applied 21.0%-66.8% to the undisturbed closing price of $7.88. | $9.53–$13.14 |
Engagement letter dated January 10, 2023; transaction fee estimated at approximately $16 million based on information available as of announcement, all contingent upon consummation of the merger. Expense reimbursement and indemnification also provided.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $432M | $525M | $629M | $752M | $874M | 19.3% |
| Revenue growth | 20.0% | 21.5% | 19.8% | 19.6% | 16.2% | |
| EBITDA | $36.0M | $55.0M | $75.0M | $103M | $119M | 34.8% |
| EBITDA growth | 71.4% | 52.8% | 36.4% | 37.3% | 15.5% | |
| EBITDA margin | 8% | 10% | 12% | 14% | 14% | |
| Implied EV / EBITDA | 15.8x | 10.4x | 7.6x | 5.5x | 4.8x |
Year-1 growth is against LTM at announcement ($360M revenue, $21.0M EBITDA); later years are year over year.
Management prepared a Base Management Case for fiscal years 2023-2032, adopted by the Board on March 28, 2023, together with NOL forecasts (21% federal tax rate); this was the only case approved for Goldman Sachs' use and relied upon by the Board. Base Management Case revenue grows from $360M (2023E) to $1,184M (2032E), Adjusted EBITDA (excl. SBC) from $21M to $162M, and unlevered free cash flow from $(22)M to $86M. An Upside Management Case (2023E revenue $371M / EBITDA $25M rising to 2032E revenue $1,258M / EBITDA $197M) was provided to Nautic in July 2023 but was not used by Goldman Sachs or relied on by the Board.
Process notes
Other Digital / HealthTech fairness opinions
- NextGen Healthcare / Thoma Bravo 2023 · 16.1x EV/EBITDA
- ShareCare / Altaris 2024 · 18.9x EV/EBITDA
- Model N / Vista Equity Partners 2024 · 24.5x EV/EBITDA
- Benefitfocus / Voya Financial 2022 · 11.6x EV/EBITDA
- SOC Telemed / Patient Square Capital 2022
- Castlight Health / Vera Whole Health 2022 · 30.4x EV/EBITDA
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