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Huron Expands Healthcare Presence
Consulting firm agrees to pay less than six times trailing Ebitda for hospital advisor.
July 11, 2008
Huron Consulting Group has moved to fortify its healthcare and education consulting practice, sealing an agreement to acquire hospital and health systems management consulting company Stockamp & Associates for $219 million earlier this week.
As part of the deal, Huron will pay $169 million in cash and $50 million of stock. The transaction was structured with an earnout arrangement. Huron is financing part of its purchase with $164 million of borrowings under a new $460 million credit facility comprised of a $220 million senior secured term loan and a $240 million senior secured revolver.
Huron, which will be left with $350 million of outstanding debt, paid a purchase multiple of less than Stockamp’s six times trailing 12-month Ebitda, according to Gary Burge, chief financial officer of Huron Consulting.
An 18-year-old healthcare and hospital consulting company, Stockamp provides consulting services to help healthcare organizations and hospitals manage financial, information technology and other operational issues. The Portland, Ore.-based target company, which generated $94 million of trailing 12-month revenue through March 31, 2008, has carried out assignments for more than 80 hospitals in the last 18 years.
Huron, a Chicago-based organization, plans to integrate Stockamp into its own health and education consulting platform, expanding its presence in the hospital consulting area. Besides assisting community hospitals, the acquirer also plans to target academic medical centers as part of its new business effort following the acquisition of Stockamp.
The research area isn’t exactly one that Huron is unfamiliar with. Its higher education practice works with more than 70 of the top 100 research universities in the US, according to Gary Holdren, Huron chief executive. “We look forward to future penetrating that academic medical market with both our Stockamp and our Wellspring resources,” Holdren said in a conference call about the transaction.
David Shade, a vice president within Huron’s healthcare practice, pointed out that the combined organization and Stockamp’s revenue-cycle software will help organizations that use the technology to improve their annual income at a metric of 2% to 4% of total annual net revenues.
“For a $1 billion healthcare organization that represents $20 million to $40 million a year, or $100 million to $200 million over a five-year horizon,” Shade said.
Huron’s acquisition is based in part on demographic trends that indicate healthcare organizations will face “increased pressures” over the next 30 years.
As part of the deal, Stockamp founder Dale Stockamp will become a consultant at Huron and assist with the company’s integration into Huron, as well as work on securing new business. Stockamp president Paul Kohlheim will become a vice president and report to Shade, who heads Huron’s healthcare business.
Huron plans to release additional details on the transaction’s impact on its financial results in an upcoming second quarter earnings announcement and conference call in August.
Skadden Arps, Slate, Meagher & Flom attorneys Richard Witzel Jr. and Charles Mulaney are serving as counsel to Huron.
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