Thoma Bravo to buy healthcare software company NextGen Healthcare in take-private deal

Ambulatory technology company NextGen Healthcare agreed to be acquired in a take-private deal with private equity firm Thoma Bravo.

Thoma Bravo will buy NextGen Healthcare for $23.95 per share in cash, which represents a 46.4% premium to the company's closing stock price on Aug. 22, the companies announced Wednesday.

The deal values NextGen at about $1.8 billion including debt, according to a spokesperson for Thoma Bravo, Bloomberg reported.

NextGen's shares rose about 14.5% to $23.50 in Wednesday trading. The deal is expected to close later this year. NextGen will pay Thoma Bravo a $41.2 termination fee if the deal falls through, according to a filing with the U.S. Securities and Exchange Commission (SEC).

Reuters reported back in August that the electronic health records company was exploring options that include a sale of the company and had tapped investment bank Morgan Stanley to advise it on its discussions with potential buyers. Bloomberg reported Monday that Thoma Bravo was in advanced talks to buy the company.

The take-private deal will provide NextGen will increased capital, expertise and strategic flexibility to "accelerate the company’s leadership in providing healthcare technology solutions,” said David Sides, president and CEO of NextGen Healthcare, said in a statement.

Sides cited Thoma Bravo's 20-plus-year record of investing in premier companies in the software and technology sectors. The PE firm has also invested in other healthcare software providers like Bluesight and Logex.

NextGen is a cloud-based technology provider serving medical practices and provides solutions spanning EHRs, patient engagement, revenue cycle management, data analytics and tools to support value-based care.

NextGen has more than 100,000 provider clients including accountable care organizations, independent physician associations, managed service organizations and dental service organizations, according to a 10-K filing (PDF) with the SEC back in May.

"Our clients range from some of the largest and most progressive multi-specialty groups in the country to sole practitioners with a wide variety of business models. With the addition of behavioral health to our medical and oral health capabilities, we continue to extend our share not only in federally qualified health centers but also in the growing integrated care market," the company wrote in the filing.

The company brought in $653 million in revenue in 2022, up from $596 million in 2021. About 90% of the company's revenue is recurring.

“NextGen Healthcare’s mission-critical EMR software and surround solutions are the backbone of ambulatory practices across the United States,” said A.J. Rohde, a senior partner at Thoma Bravo, in a statement. “We are so proud to be working with NextGen Healthcare in its next phase as a private company and look forward to continued product innovation to better support NextGen Healthcare’s thousands of highly-valued customers.”

Thoma Bravo plans to further accelerate product investments to better support the "increasingly complex needs of ambulatory providers and ultimately improve patient outcomes," Peter Hernandez, a vice president at Thoma Bravo, said.

The acquisition comes after NextGen agreed earlier this year to pay $31 million to the federal government to settle a whistleblower lawsuit alleging that it violated the False Claims Act. The Department of Justice alleged that NextGen violated the False Claims Act by misrepresenting the capabilities of certain versions of its EHR software and providing illegal incentives to induce referrals to its software, according to a complaint made public the same day the settlement was announced.

"The agreement with Thoma Bravo validates NextGen Healthcare’s substantial strength and follows interest in the company by many parties. It is the result of a deliberate process to maximize shareholder value and best position NextGen Healthcare for continued growth and success. The agreement delivers significant cash value to our shareholders and creates exciting opportunities for NextGen Healthcare’s employees and clients," Jeffrey H. Margolis, chair of the NextGen Healthcare board of directors, said in a statement.

NextGen Healthcare is just the latest in a string of healthcare tech companies to go private. In July, asset management firm TPG agreed to buy healthcare IT company Nextech from Thomas H. Lee Partners for $1.4 billion. Nextech provides electronic medical record and practice management software to specialty physician practices. 

Last year, healthcare investment firm Patient Square Capital announced plans take acute care telemedicine company SOC Telemed private in a deal that valued the company at roughly $304.2 million.

Tivity Health also agreed to a take-private deal last year and was purchased by private equity firm Stone Point Capital for $2 billion.

PE firms are increasingly betting on healthcare as a sector that is relatively resilient in economic downturns. Healthcare deals totaled $187.8 billion globally during the first half of 2023, an increase of 43% from a year ago, according to Refinitiv.

Reuters reported on Monday that revenue cycle management solutions company Waystar is preparing an initial public offering at a valuation of as much as $8 billion.

Morgan Stanley & Co. LLC acted as financial adviser to NextGen Healthcare, and Latham & Watkins LLP acted as legal adviser.

William Blair & Company is acting as financial adviser to Thoma Bravo, and Goodwin Procter LLP is acting as legal adviser.