Allscripts has announced a definitive agreement to combine resources with private equity firm GI Partners in a joint venture that will acquire privately held post-acute care EHR provider Netsmart Technologies, Inc. This transaction creates the largest technology company exclusively dedicated to human services and post-acute care.
The joint venture will combine the Allscripts Homecare™ business, which serves more than 30,000 home health, private duty and hospice clinicians in the U.S., Guam and Puerto Rico, with Netsmart, whose clients span 23,000 organizations, including more than 450,000 care providers and more than 40 state systems. The new company will focus on enhancing human services, post-acute care and outcomes, helping providers respond to evolving compliance and regulatory demands, and improve efficiency and performance.
The acquisition will create a company with more than $250 million in annual revenue and more than $60 million in annual operating income. Upon completion of this transaction, the combined business will operate as Netsmart and be based in its current headquarters in Overland Park, Kansas. Mike Valentine, Netsmart’s Chief Executive Officer, will lead the combined company.
“We are thrilled to join forces with Netsmart and GI Partners to immediately establish a technology solutions leader in the strategic human services and post-acute care market,” said Paul Black, Chief Executive Officer of Allscripts. “Creating a software and services platform for caregivers to manage patients through the combined realities of post-acute care and mental health is absolutely essential to achieving the value-based care goal of healthy communities and populations. This joint venture finally brings scale with a depth and breadth of solutions required to navigate the immense opportunities in this growing global marketplace.”
Acquisition Details
Allscripts will contribute 100% of its Homecare business, plus approximately $70 million in cash to the joint venture. This consideration will be combined with the cash investment from GI Partners plus third-party debt financing to consummate the acquisition of Netsmart. Allscripts will be the largest owner of the joint venture and expects to consolidate the entity for financial reporting purposes as required under Generally Accepted Accounting Principles. The debt of the joint venture will be non-recourse to Allscripts and its wholly-owned subsidiaries, and the Company’s existing credit facilities will remain in force with significant remaining available liquidity thereunder.
“The human services and post-acute segments are critical to the long-term value-based care business strategy of our clients,” said Rick Poulton, Allscripts President. “This joint venture creates value by unleashing the full potential of our homecare asset, and we believe this business will flourish under the focused stewardship of Mike Valentine and his team. They are a proven team with a history of building successful companies passionate about clients’ success. This transaction creates a strategic platform for growth that will benefit the industry, the joint venture’s clients and Allscripts shareholders.”
Acquisition Boosts Allscripts Revenue Projections for 2016
Allscripts management expects the transaction to add approximately $150 million in 2016 revenue, be accretive to 2016 Adjusted EBITDA(1) and neutral to non-GAAP earnings per share in 2016.
