Assessing Investment Opportunities: Evaluating an Acquisition in the U.S. Healthcare Provider Outsourcing Market

Executive Summary

A private equity firm engaged Everest Group to help it evaluate the validity and value potential of acquiring a provider of comprehensive IT and Knowledge Process Outsourcing (KPO) in the U.S. healthcare provider industry. The initiative not only resulted in a positive investment decision, but also drove the firm to investigate further investments in the sector.

The Client’s Challenge

Uncertain of the viability and business benefit of acquiring a privately held outsourcing provider focused on the U.S. healthcare provider (i.e., hospitals/clinics) industry, a major, international private equity firm sought Everest Group’s expertise in the healthcare outsourcing market to address five major questions:

1. How attractive will the healthcare provider outsourcing industry be over the next five years?
2. What strengths and competitive differentiators does the acquisition target possess, and what more can be leveraged  to enhance its position in the marketplace?
3. How can offshoring improve the margin and growth aspects without fundamentally increasing risks?
4. What is the revenue growth and margin potential, including offshoring leverage, for the next five years and beyond?
5. Does the team expected to lead the company going forward possess the capabilities to maximize the value?

While the charter was broad and the stakes very high, the private equity firm required answers to all these questions in only four weeks.

Insight to Action

Everest Group first mobilized an international team consisting of its U.S. healthcare experts, its senior M&A/private equity resources in the U.S. and India, and analysts in the Everest Research Institute. Everest Group next conducted original research on market, transaction, and competitive data to profile the recent growth trends and future growth drivers in the market segment. Everest Group’s Healthcare Industry Practice then leveraged its expertise to refine the research results to the pragmatic realities of the market, and evaluate the competitive capabilities of and potential enhancements to the acquisition target. Focuses here included crucial areas including comprehensiveness of product line/priorities, sales force transformation strategies, and executive team organization. Everest Group supplemented the analyses with findings from interviews with the target’s key personnel, select clients, and a representative sampling of prospects.  Everest Group also spent time with potential investors to enable pressure testing of the fact-base and assumptions regarding the dynamics of the distinctive marketplace and educate them on the target’s unique potential for growth. Throughout the engagement, Everest Group worked in tight collaboration with the private equity firm, the target company, investment bankers, and potential lenders.

Impact

Everest Group’s direct, field-level outsourcing experience and knowledge of both buyers and service providers in the healthcare market sector helped substantially define, refine and in some cases redefine all parties’ view of the value potential of the acquisition. Based on Everest Group’s knowledge, insights, and recommendations, the investment was approved. Moreover, as a result of the engagement and overarching findings, this international private equity firm is looking to deepen its investments in the dynamic healthcare outsourcing sector.