2 major health tech deals close: Virgin Pulse, HealthComp's $3B merger and NextGen's $1.8B PE buyout

Two major healthcare deals closed last week on the heels of a relatively quiet year for healthcare M&A deals.

Dealmaking activity in the healthcare sector hit a three-year low in the second quarter of this year, according to a report from KPMG. There were 245 healthcare M&A deals in the second quarter of this year, 7% below deal volume a year ago and 41% short of second-quarter 2021 levels.

Virgin Pulse, digital-first health, well-being and navigation company, completed its merger with third-party health benefits administrator HealthComp, the companies announced Thursday.

The combined company's value is $3 billion, the companies said when they announced the deal back in late September.

The merger aims to drive lower costs and improve outcomes for employers. Bringing the companies together will create a tech-enabled platform that can develop novel benefit designs while leveraging artificial intelligence to track and improve outcomes, company executives said.

“Today is an exciting day for our clients, members, and employees,” said Chris Michalak, CEO of Virgin Pulse and HealthComp, in a statement. “We are stronger together as one purpose-driven organization with the technology, talent, and opportunity to radically change how people engage with and navigate the healthcare ecosystem. This combination will deliver on the ultimate vision of the Homebase for Health platform, and I’m looking forward to making a bigger impact on the lives of millions of people.”

New Mountain Capital is the majority owner of the new company. Marlin Equity Partners will maintain minority ownership. Other shareholders include PE firm Blackstone and Morgan Health, a JPMorgan Chase company focused on employer-sponsored healthcare.

In an exclusive interview with Fierce Healthcare, Morgan Health CEO Dan Mendelson said the combined company aligns with its goals and that the focus on the mid-sized employer market made the investment an attractive option.

"Together, it's a scale company that will be serving more than 20 million members and 1,000 self-insured employers," he said, "and, as a result, it has a lot of reach."

Also last week, private equity firm Thoma Bravo finalized its $1.8 billion acquisition of ambulatory technology company NextGen Healthcare. NextGen shareholders approved the deal during a meeting Tuesday and will receive $23.95 per share in cash.

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. The health tech company serves more than 100,000 ambulatory healthcare providers who care for more than 65 million patients in the U.S.

The deal was initially announced in early September.

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, in a statement.

"We are delighted to partner with Thoma Bravo to accelerate the delivery of transformational solutions to the ambulatory healthcare marketplace," Sides said in a statement issued Friday. "Our employees, clients and partners are unified behind our vision of achieving Better Healthcare Outcomes for All. By combining our deep healthcare domain expertise with Thoma Bravo's renowned operational expertise, we believe we can deliver on that vision faster."

"NextGen Healthcare's client-centric suite of solutions help solve some of the most critical problems facing ambulatory healthcare providers of all sizes across the country," said A.J. Rohde, a senior partner at Thoma Bravo. "Together with David and his team, we look forward to driving accelerated growth and product innovation to even better serve the healthcare industry—from provider to patient."

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.

"We are excited to support NextGen Healthcare's long-term growth by leveraging Thoma Bravo's operational and software expertise," said Peter Hernandez, a vice president at Thoma Bravo. "We look forward to adding new products and capabilities, both organically and inorganically, to continue enabling NextGen Healthcare's customers to deliver exceptional patient outcomes."

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.

Last year, healthcare investment firm Patient Square Capital announced plans to 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.