2011 Year-End Review


Robust investment activity and key milestones characterized our 2011. We invested in four (4) new platform ventures (all highlighted below); Parthenon portfolio companies completed 23 add-on acquisitions; two (2) portfolio companies were sold; and we raised Parthenon Investors IV at its $700 million hard cap. All the while, the macro background of financial market instability, sluggish US growth, political paralysis and uncertainty, and European banking crisis added further complexity and challenges. While navigating this volatile landscape, the basic tenets of Parthenon Capital Partners’ (“Parthenon”; investment strategy have remained constant: we look to partner with strong management teams to build and grow service-based businesses with recurring revenues, defensible niches and technology- and/or IP-based competitive advantages.This strategy has persevered and thrived in this treacherous environment as our portfolio has performed well and we’ve been able to take advantage of opportunities to make numerous add-on acquisitions (68 add-ons over the last three years), effect transformative mergers, and acquire new platform companies.

Highlights include:

The creation and launch of Altegra Health, Inc. (“Altegra”; was the culmination of a decade of experience in the healthcare revenue cycle management space and the recent emergence of multi-faceted revenue management needs of health plans and risk bearing providers in conjunction with increased scale, rigor and complexity around government payers. The Company’s solutions include a full continuum of acuity measurement, encounter reporting, eligibility and enrollment services, and quality reporting services and technology for government funded health plans. Altegra is the integration of five best-of-class companies: Dynamic Commerce Applications, Social Service Coordinators (“SSC”), and Austin Provider Solutions, all acquired in 2011; and The Coding Source and Sinaiko Healthcare Consulting, both acquired in 2010.

We are excited to partner with Kevin Barrett, CEO and President of Altegra Health and former executive at SSC, to build this market leader in a key sector of healthcare.

Eliza Corporation (“Eliza”; is a high-growth HCIT company focused on member engagement, analytics and decision support software for leading health plans, PBMs, provider groups and employers. The Company’s mission is to influence and improve the health and wellness of healthcare members and patients through the use of an advanced speech recognition engine, highly effective interaction design methods, sophisticated multimodal outreach and robust data analytics. In its 12 year history, the Company has had over 400 million interactions with over 40 million members.

We partnered in June 2011 with the founders, Lucas Merrow and Alex Drane, to grow the company through product additions, acquisitions and new customers, and are excited to recently welcome John Shagoury, former senior executive at Nuance Communications, as President.

H.D. Vest (“HDV”; was acquired by Parthenon in October 2011 from Wells Fargo (“Wells”). HDV is a top 20 independent broker-dealer (“IBD”) and provides investment products, training, clearing and other back-office services to independent tax preparers to allow them to also provide financial advisory products and services to their clients. HDV’s technology and alignment has made them the #1 IBD in the tax segment with almost 5,000 advisors and approximately $30 billion assets under management. After a 2010 strategic review, Wells decided to spin-off this business to a financial buyer. Given the regulatory environment, volatility of the financial markets and the complexity of the IT and HR carve-out requirements, Parthenon was selected by both management and Wells as the optimal owner to affect both the transaction and transition and contribute strategic guidance to re-energize growth.

Roger Ochs, CEO, leads a highly experienced management team that has grown the business over its 25+ years of existence through bull and bear markets. As we’ve realized a majority of the carve-out milestones since the close, the Company’s potential has become increasingly apparent.

We led a recapitalization for Injured Workers Pharmacy (“IWP”;, a mail-order pharmacy business targeting the workers’ compensation market, in late 2011 after following the Company for over five years. A compelling business without any peers, we got to know the management team well and watch them more than triple in size, expand its business nationally into 30 states and build out its management team and infrastructure.

The transaction was structured in conjunction with a management succession plan around the founder and CEO. While the Company has a deep and broad team, we expect to add a senior executive shortly and aggressively expand our products and services in the workers’ compensation market.

We sold Restaurant Technology, Inc. (“RTI”; in May, after an 11 year investment period during which the Company grew from less than $10 million in sales to hundreds of millions in sales as it rolled-out its cooking oil disposal services to the quick-service restaurant segment nationally. RTI is an example of a proprietary service offering with a disruptive technology that created its own market niche over our ownership with a lot of hard-work and persistence. While RTI continues to be well-positioned for further growth through continued QSR penetration, it was time for us to realize the value created and allow the Company to find a new partner for the next stage. We appreciated the opportunity to work with Jeff Kiesel and his talented management team and wish the Company and its new owners well.

After a five year relationship, Wildlands, Inc. (“Wildlands”; was sold to a timber investor, in-part to leverage their land and timber expertise with Wildlands’ conservation expertise. Wildlands is the leader in the dynamic market to design, build and sell wetlands and endangered species habitats to public and private developers. Working closely with local, state, and federal agencies, Wildlands generates environmental credits by creating projects that protect wetlands and endangered species habitats into perpetuity. While building a national presence during our ownership, this emerging market still has substantial potential ahead of it and the Company should benefit from its new land management partner. We wish the founder, Steve Morgan, and management team well.

We’d also like to welcome Lesly Schlender, Director of Research and Executive Outreach, to the Parthenon team from GTCR. New associates in the past year are Andy Jang from FT Partners; Chas Lutz from Monitor Clipper Partners; and Collin Lesser from JP Morgan. We are excited about these new team members and hope you get the opportunity to interact with them.

We held a final closing on our fourth fund, Parthenon Investors IV, in February 2012 at its hard cap of $700 million, exceeding the fund target of $600 million. We are very pleased with the strong support we received among our investors and are excited to wrap-up the fundraising several months after our initial closing.

Our focus remains the same: targeting control recapitalizations with total equity investment of $20 million – $125 million and total enterprise value of $50 million – $500 million. Our core strategy is being a value-added partner to middle market growth companies in the financial and insurance services, healthcare and business services industries (particularly companies that have an intellectual property, technology or route-based advantage). Criteria for new platforms generally include recurring revenue streams, information or technology-intensive operations, attractive return-on-invested capital characteristics and the opportunity for Parthenon to differentiate itself from alternative equity providers. Two-thirds (2/3’s) of our portfolio companies are highly acquisitive (each having averaged eight (8) add-ons), with criteria for targets determined primarily by strategic, operational and cultural considerations. While we continue to be concerned with the depth and breadth of the current economic recovery, the herd mentality of the broader capital markets and the risk of political and regulatory vagaries, we think our significant experience in targeted sectors, resources to understand more complex situations, partnership focus and our long-term investment horizon both differentiate Parthenon in a tougher environment and allow us to confidently make new investments.

Thank you for your continued support and we look forward to working with you in 2012. 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.