2009 Year-End Review


We started 2009 with a shrinking economy, massive dislocation within many industries and little business visibility. However, the basic tenets of Parthenon Capital Partners’ (“Parthenon”) investment strategy have remained the same throughout and persevered in this environment: we look to partner with strong management teams to build and grow service-based businesses with recurring revenues, defensible niches and competitive advantages. This philosophy has paid-off as our portfolio has held up well and we have taken advantage of opportunities that otherwise would not have been available. As a result, we continued to execute on numerous growth initiatives at various portfolio companies and acquire new platform companies.

We closed on two new platform acquisitions, completed 26 synergistic and accretive add-on acquisitions across seven portfolio companies and saw one of our companies complete an initial public offering. This activity resulted in data compiled by industry publication “Pitchbooks” that ranked Parthenon Capital Partners as the “most active private equity investor” in 2009.

Highlights include:

Seaside National Bank & Trust is a nationally-chartered, rapidly growing community bank based in Orlando, Florida that focuses on providing superior customer service to high net worth individuals.  Parthenon had identified community banking as an attractive financial services sector and Seaside as a very capable and strong competitor, demonstrating one of the highest growth rates of any U.S. bank in 2009 in a dislocated market. Parthenon led a private equity group of Lovell Minnick Partners and Continental Investors. While involving a high level of complexity and scrutiny in regards to regulatory requirements, the deal was approved by all three relevant regulators: Federal Reserve, FDIC and OCC. We are extremely excited to partner with Gideon Haymaker, President and CEO, and his experienced team in building a premier boutique bank in the Southeast.

loanDepot is an example of Parthenon teaming with a world-class management team to launch a niche financial services business, specifically an online retail mortgage origination business.  Anthony Hsieh, CEO and Chairman, and management have successfully built and sold two mortgage businesses prior to partnering with Parthenon. Our thesis is that due to a high level of dislocation in the market and a shift toward online origination that a strong team will be able to build a major player in the market.

Intermedix completed five (5) acquisitions in 2009, further enhancing its position as the leading provider of revenue cycle management technology and services to emergency medical providers nationwide. Intermedix was formed in 2006 through the merger of Medical Consultants, the largest independent RCM for emergency physicians and hospitals; ADPI, the market leader for emergency transports; and Intermedix, an HC technology provider. 2009’s acquisitions enhance the core product offering and solidify the Company’s position in the Texas and California markets. Doug Shamon, CEO, continues to pursue acquisitions to complement organic growth, leverage its technology and intellectual property platforms and help healthcare providers improve their performance and compliance.

Ascension is our retail insurance brokerage company that was successfully launched in 2007 in partnership with Len Kline, a 30 year insurance executive. Ascension completed five (5) acquisitions in 2008 and four (4) acquisitions in 2009, including the acquisition of Renaissance and Portal Group, both California-based specialty brokerage businesses. 2009’s acquisitions more than doubled pre-corporate EBITDA and further solidifies Ascension’s strategy to build a leading brokerage focused on small and mid-size businesses, regional density, cross-selling opportunities between P&C, employee benefits and specialty lines and best practices across all operations. Ascension expects to continue being acquisitive in 2010.

Triad Isotopes, formed by Parthenon and management in late 2006, announced in December 2009 that it entered into an agreement to acquire the U.S. radiopharmacy network currently owned and operated by Covidien (ticker: COV). Under the agreement, Triad will acquire 37 pharmacies with net sales of approximately $180 million. On a combined basis, Triad will become the strong #2 player in this industry, which distributes radiopharmaceuticals for both diagnostic imaging and treatment of certain diseases. In little more than three years, CEO Dom Meffe and Parthenon have transformed a small, owner/operated business into a national market leader while successfully managing through the patent expiration of a key product.

ADESA (ticker: KAR), a portfolio company of Kelso & Company, Parthenon, Goldman Sachs and ValueAct Capital Partners, completed its initial public offering (“IPO”) December 17th. ADESA was acquired in 2007 through the merger with Insurance Auto Auctions (“IAAI”), an existing Parthenon and Kelso portfolio company, and created a leading provider of both wholesale and salvage auto auction services. The IPO is a significant milestone and highlights the successful integration of IAAI and KAR and ability to grow during a period of unprecedented turmoil in the automobile sector.

We expect more of the same in 2010 – actively pursing new platform and add-on acquisitions in our targeted industry sectors: financial and insurance services, healthcare and business services.  While the macro-economy, political and regulatory uncertainties and financing markets continue to present challenges, we believe our significant experience in targeted sectors, resources to understand complex situations and regulated industries, and our long-term investment horizon continue to differentiate Parthenon Capital Partners. Attractive platforms typically have management, intellectual property, technology and/or route-based advantages. We have also been successful in raising debt financing for new investments and portfolio companies and believe we can navigate dynamic credit markets.

Thank you for your continued support and we look forward to working with you in 2010.  Don’t hesitate to reach out to any member of the Parthenon Capital Partners team. And if in Boston or San Francisco, please stop by to see us.