2015 Year-End Review
The last 12 months were extremely active with substantial accomplishments:
- Three platform investments – Stratose, Millennium Trust and the combination of Premier Healthcare Exchange, GlobalCare and Pay-Plus Solutions with Stratose
- Three exits – ASG, Altegra Health and HD Vest – all to strategic buyers
- 11 add-on acquisitions at eight portfolio companies
- 15 C-suite executives at 10 portfolio companies
We have consistently created value by collaborating with management teams to build leading-edge companies though the development of long-term investment theses and corporate strategies; the sourcing, execution and integration of acquisitions; optimization of human capital; and the build-out of corporate infrastructure. We continue to leverage our experience, expertise and networks in targeted financial services, healthcare services and business services sectors.
- Control recapitalization of Stratose, Inc. (“Stratose”; www.stratose.com) in partnership with its management team and founders. Stratose provides claims cost containment solutions for managing healthcare costs for medical, dental and workers compensation payers, primarily in the out-of-network area. This partnership with founders Scott and Sean Smith was possible because of shared understanding of the complex dynamics between payers, patients and providers and common vision to build-out a broader set of solutions internally and via acquisitions.
- Acquisition of Millennium Trust Company (“Millennium Trust”; mtrustcompany.com), a leading provider of technology-enabled asset custody solutions for institutions, advisors and individuals with more than $16.8 billion in assets under custody and 408,000 accounts. From our first meeting in 2012, we’ve been impressed with the company’s products, processes, people and technology and are thrilled to have been able to team-up with the management, led by Scott McCartan and Gary Anetsberger, to acquire the company. Its unique business model and compelling value proposition are creating substantial new business momentum organically. We plan to accelerate and scale further through follow-on acquisitions.
- Merger of and investment in Premier Healthcare Exchange (“PHX”; www.phx-online.com), Stratose, GlobalCare (www.globalcare.net) and Pay-Plus Solutions (“PPS”; www.ppsonline.com). In six months, we combined Stratose with three other HCIT companies to create the next generation company in claims cost containment and healthcare value management. The combined company provides a comprehensive array of network management, claims integrity, payment remittance solutions and analytic services for medical, dental and workers compensation for over 500 payer clients, including large and medium-sized health plans and TPA’s. We are excited to partner with the senior managers of these businesses, who retain significant ownership in the combined company, and share common vision of around the opportunity to service customers.
- Sale of ASG Security (“ASG”) to Protection 1, a portfolio company of Apollo Global Management. Parthenon originally acquired ASG in conjunction with management in 2007 and more than quadrupled the size of the business to become the 10th largest US alarm company over our eight-year ownership period. Combined, Protection 1 and ASG are the second largest security alarm installation and monitoring company in the US. We appreciate our partnership with Joe Nuccio and wish him and his team the best.
- Sale of Altegra Health (“Altegra”) to Emdeon, Inc. Altegra was a Parthenon-style build-up in HCIT with a core investment thesis around the radical change in healthcare payments from volume-based to value-based. Between 2009 and 2014, Altegra combined seven point-solution companies to become a national, full-service leader in risk adjustment and quality analytics for a wide range of health plans and payers. Kevin Barrett and his team in a short period of time were able to seize upon a tremendous opportunity and build a highly strategic business.
- Sale of HD Vest Financial Services (“HD Vest”) to Blucora, Inc. (NASDAQ: BCOR). HD Vest is the leading independent broker-dealer providing wealth management and advisory solutions for tax professionals. Parthenon partnered with management to purchase HD Vest from Wells Fargo in 2011, separated the business from its parent and then transformed it into a market leader, providing technology, systems, compliance and marketing solutions to its advisors. We are very proud of what Roger Ochs and the management team were able to accomplish in our four years of ownership.
Zach Sadek was promoted to Partner during 2015. We’ve also welcomed Jim Chappell as a Vice President from Technology Crossover Partners to focus on technology and software investing, Max Pinto from the Parthenon Group as Director of Strategy and Implementation and new associates Matt Lentz from Deloitte Corporate Finance (fka McColl Partners) and Kyle Record from Harris Williams.
Our primary investment criteria include:
- Equity investments of $20 million – $125 million per transaction and total enterprise value of $35 million – 500 million
- Industry focus
- Financial and insurance services
- Healthcare services
- Business, information and technology services
- Common criteria: recurring revenue streams, high intellectual property content, information or technology-intensive operations, route-based businesses
- Buy-and-build situations
- 2/3’s of our current portfolio is highly acquisitive, averaging five add-ons per company
We continue to focus on key themes where we have substantial experience and expertise, including sectors recovering from regulatory assault; incomplete management teams and/or complicated management succession dynamics; aggressive buy-and-build strategies; and disruptive technologies and first movers. Our experiences and resources allow us to move quickly and work closely with operators to understand complex situations and to optimally position and build businesses.
Thank you for all your help and support. Our partnerships with you are essential to our business and we look forward to working with you in 2016. 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.