WellSky Nabs New Investment from Leonard Green & Partners

Private equity-backed health care software company WellSky has a new investor and a new capital structure, the company announced Monday. 

TPG Capital — the PE platform that currently owns WellSky — has entered into a definitive agreement to add private equity firm Leonard Green & Partners LP (LGP) as a capital partner. As part of the deal, TPG Capital will also make a new equity investment in WellSky.

Terms of the transaction were not disclosed. However, WellSky CEO Bill Miller provided Home Health Care News with some color on the company’s new structure.

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“I think it’s safe to say [the deal] is more like a 50/50 partnership,” Miller told HHCN. “Leonard Green has come in and has taken a meaningful stake on par with TPG.”

WellSky offers technology solutions, analytics and services to post-acute and community care providers. That includes home health agencies, hospices and hospital systems, just to name a few examples.

As an organization,WellSky’s goal is to empower organizations to improve whole person care and care coordination using predictive insights and other services. The Overland Park, Kansas-based tech giant currently serves more than 15,000 client sites around the world.

Meanwhile, TPG Capital — which acquired WellSky, then Mediware Information Systems Inc., back in December 2016 — is the private equity platform of alternative asset firm TPG. Since 1993, TPG Capital has invested $50 billion, with about $11.5 billion of those investments in the health care space.

Kindred Healthcare — which is also co-owned by Humana Inc. (NYSE: HUM) and Welsh, Carson, Anderson & Stowe — is one notable home-based care example.

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LGP, on the other hand, has raised over $40 billion of committed capital since inception. It specializes in consumer, business and health care services providers, as well as businesses in retail, distribution and industrials. 

WellSky will use its new investments from TPG Capital and LGP to grow and expand its current capabilities and service offerings. Miller singled out analytics, telehealth and payer relationships as specific growth areas of interest.

“For our clients, this is great news,” Miller said. “This is just adding to our capacity, capabilities and the ability to support them better. The management team is staying the same, and we’re the same company we were yesterday. We just have the wherewithal to continue to develop solutions that support them — and to use our ears better and really get things done faster.”

The addition of LGP and the new investment from TPG Capital will help the company “be better at everything” it already does, Miller added.

The transaction is expected to close in the third quarter of 2020.

From rumors to reality

WellSky’s Monday announcement doesn’t come as a total surprise.

PE Hub speculated WellSky could be getting new ownership earlier this month, citing “five sources familiar with the matter.”

The publication reported WellSky’s full sale valuation could be around $3 billion, thanks to the company’s EBITDA of about $150 million. It also floated the possibility of the 50-50 joint structure that came to be.

Miller also confirmed other details listed in the report, such as the timing of the transaction.

“This is something we had contemplated doing this year,” he said. “We were definitely contemplating it when the coronavirus outbreak hit … and it gave us some pause.”

When WellSky saw that its business continued to perform “very well” amid the COVID-19 emergency, it decided to move forward with the deal process. It heard from a handful of interested buyers and ultimately went with LGP due to the “aggressiveness of its bid” and its understanding of the WellSky vision and markets, according to Miller.

Growth trajectory

Since being acquired by TPG in late 2016, WellSky has grown significantly, thanks in large part to M&A. Recent transactions include the purchase of ClearCare late last year and another five acquisitions in 2018.

With the help of LGP, WellSky hopes to continue with that trajectory, using both organic and transactional growth methods.

“I fully expect the company to double in size again,” Miller said. “I don’t have any doubt about it. That’s what we do, and that’s what we’ve done. Largely, we’ve tripled in size, and now I suspect, we’ll double and triple again over the next handful of years.”

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