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Allscripts Sells Stake in Behavioral Health EHR Netsmart for $525M

Two private equity firms acquired Allscripts’ stake in behavioral health EHR vendor Netsmart for a total of $525 million.

Allscripts sold its stake in Netsmart for $525 million.

Source: Thinkstock

By Kate Monica

- Allscripts has signed a definitive agreement to sell its stake in behavioral health EHR vendor Netsmart to private equity firms TA Associates and GI Partners for a total of $525 million.

The sale ends a two-year relationship between Allscripts and Netsmart that began when Allscripts contributed its homecare business to the behavioral health EHR vendor in exchange for the largest ownership stake in the company.

In addition to behavioral health, Netsmart also offers health IT solutions for human services and post-acute care providers. Allscripts announced it plans to close the sale by the end of the fourth financial quarter of 2018.

“Netsmart provides the scale and the depth and breadth of solutions required to navigate the significant opportunities in the post-acute care market, and we are thrilled with how the business has performed over the last two years,” said Allscripts President Rick Poulton.

“We believe now is the right time to recognize the significant value we have created by monetizing our investment and improving our balance sheet,” Poulton added.

Allscripts stated it will use the $525 million to repay long-term debt, invest in other growing areas of its business, and repurchase its outstanding common stock.

In total, Allscripts hopes to reduce its outstanding debt by about $500 million.

“Allscripts investment in Netsmart helped create a critical solution for caregivers to achieve the value-based care goal of health communities and populations,” said Allscripts CEO Paul M. Black. “Through our ownership position we quickly generated significant value, and this transaction will be beneficial for our shareholders, our clients and our organization.”

JP Morgan Securities and Evercore served as financial advisors during the sale.

While Allscripts did not reveal which entities bought the company’s stake in Netsmart, TA Associates released a statement announcing it teamed up with GI Partners to acquire the stake.

Kirkland & Ellis provided legal counsel for the private equity firms, while Deloitte served as financial advisor for the purchase.

“Since our founding, Netsmart has sought partners who share our commitment to excellence and quality healthcare outcomes,” said Netsmart CEO Mike Valentine. “TA Associates brings decades of experience investing in the healthcare industry and supporting efficiency, quality care and cost containment.”

“Along with the team at GI, I am delighted to welcome TA as an investor and look forward to a close collaboration in continuing the evolution of Netsmart,” added Valentine.

Allscripts worked with GI Partners to purchase nearly all of Netsmart for $950 million in 2016.

“Increasingly complex clinical, billing and regulatory requirements, and the need to measure and report patient outcomes, are accelerating the adoption of Netsmart’s software solutions,” said TA Associates Managing Director Hythem El-Nazer. “In addition, as the HHS and post-acute industries continue to consolidate and expand, the need for technology solutions to coordinate care and drive efficiency will grow.”

Poulton first announced plans to sell the EHR company’s joint venture stake in Netsmart during an earnings call with investors in August.

In 2018, Netsmart launched a new cloud-based EHR system offering called MyUnity designed to meet the needs of home health and senior living care providers. MyUnity gained more than 40 new users in the post-acute care market over the summer.

Netsmart also acquired home health IT solutions from Change Healthcare, as well as cloud-based software company HomeCare Accounting Solutions (HAS) in 2018. These acquisitions helped to bulk up Netsmart’s home health and hospice IT solutions portfolio. Netsmart integrated these solutions with its own CareFabric home health offerings.

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