2007 Year End Review


We are extremely pleased with our accomplishments over the past year including a successful final close of Fund III in May.  Despite turmoil in the overall markets, the year was extremely active for Parthenon.  We are excited about a number of new transactions and liquidity events.  We look forward to another successful year in 2008 and hope to have the opportunity to work with you.

Highlights of 2007 include:

Abeo, Inc. is a newly formed company created by the simultaneous merger of three leading anesthesia revenue cycle management companies.  The three predecessor companies, Salt Lake City-based Professional Management Group, Ft. Worth-based Summit HMR and Atlanta-based MedSuite, were each leaders in their respective categories of anesthesia reimbursement services. We teamed with Mark Smith, an experienced HCIT and medical billing executive, and senior management from the three predecessor companies to effect the acquisition.  The company expects to grow via acquisition and organic initiatives, in part taking advantage of now being the second largest, anesthesia-only provider with a national scale and leading technology platform.

Alarm Security Group (“ASG”) is the 11th largest security alarm monitoring business in the US.  It has grown organically and through acquisition and has leading market shares in the mid-Atlantic, Southeast and Texas.   Immediately following the initial close, ASG acquired another security alarm business in overlapping and complementary geographies, Matrix, thereby increasing account levels by approximately 30% and further improving operating leverage and efficiencies.  We partnered with veteran executives Joe Nuccio and Ralph Masino on this transaction.

Ascension is a build-up strategy in the retail insurance brokerage space in which we partnered with Century Capital and industry executive Len Kline.  Len Kline is the former President of Compass Bank’s Insurance Services Group and had been at Marsh & McLennan for 25 years prior to Compass.  Ascension is targeting well-run P&C and employee benefits brokers in certain geographic markets and bringing, in addition to capital, best practices, management expertise, and back-office resources to create greater critical mass, operating leverage and cross-selling opportunities.  Ascension closed on its first acquisition, Bryant Wharton of Atlanta, in January 2008 and is currently working towards a close on a west coast-based brokerage business.

Triad Isotopes is the largest independent nuclear pharmacy operator in the US based in Orlando, Florida and today operates 27 radiopharmacy and cyclotron operations in the Southeast. The company distributes radiopharmaceuticals for both diagnostic imaging and treatment of certain diseases. We closed on the initial platform companies in December 2006 and were successful in 2007 in making several add-on acquisitions in the Southeast, thereby increasing both EBITDA and revenues by more than 50% in its first year.

ADESA was acquired in a going-private transaction sponsored by Kelso & Company, Parthenon Capital, Goldman Sachs and ValueAct Capital Partners that closed in April 2007. As part of the transaction, Insurance Auto Auctions (“IAAI”), an existing Parthenon Capital and Kelso portfolio company, was merged into ADESA to create a leading provider of both wholesale and salvage auto auction services.  It is exciting to be working with the management team and other sponsors as many of the best practices employed at IAAI are applied throughout the entire company.

AmWINS, in which we originally invested during 2005 in partnership with the executive management team, has since grown to become the largest wholesale insurance broker in the US.  It has had another year of significant milestones even while faced with a soft P&C insurance market.  AEU, a leading marine MGA, was acquired in June adding significant diversity and scale to the enterprise. AmWINS also created shareholder liquidity through a dividend recapitalization (and on a covenant-lite basis) in June, just prior to the downturn in the debt markets.

MedAssets (Ticker: MDAS) also provided shareholder liquidity through a dividend recapitalization in the first half of the year and then proceeded to successfully complete an IPO in December 2007.  The IPO priced at the wide end of the range in midst of a difficult market and has continued to trade up, a great accomplishment for John Bardis and his team and, we believe, reflective of the strength of the business.

We added significant human resource capabilities over the past year.  Brad Sloan, a Vice President focusing on healthcare services, joined from Broadlane in late 2006.  Todd Ofenloch, a Vice President focusing on business services, joined out of business school following stints at GTCR and Halifax.  Brad Stewart, Vice President Operations, joined from McKinsey & Company.  Matt Umscheid, Vice President Operations, joined from L.E.K. Consulting.

We are also pleased to announce that Jon Grad was promoted to Partner at the end of 2007.  Jon joined Parthenon Capital in 2005 and is active in our financial services, software, distribution and insurance activities.

We continue to focus on our core strategy of being a value-added partner to middle market growth companies in select industries including: financial and insurance services, healthcare and business services (particularly where companies have an intellectual property, technology or route-based advantage). Criteria for new platforms generally include recurring revenue streams, information-intensive operations, attractive return-on-invested capital characteristics and the opportunity for Parthenon Capital to differentiate itself from alternative equity providers. Most of our portfolio companies are acquisitive, with criteria for targets determined primarily by strategic, operational and cultural considerations. While currently cautious on the overall economy, we believe opportunities will be created by the current dislocation and uncertainty. We think our significant experience in targeted sectors, resources to understand more complex situations, and our long-term investment horizon both differentiate Parthenon in a tougher environment and allow us to confidently make new investments.

We look forward to an active 2008 on both portfolio and new platform opportunities. Don’t hesitate to reach out to any member of the Parthenon Capital team. And if in Boston or San Francisco, please stop by.