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Happy Thursday!

A prominent activist investor is back in the headlines in the universe of healthcare M&A this week.  

Paul Singer’s activist hedge fund, Elliott Management, launched an offer to take out Athenahealth for $160 per share, valuing the healthcare IT company just south of $7 billion.

Whether you’re shocked by the news or not, the development presents more questions than answers… 

Among them: Does Elliott, which began agitating for change at Athenahealth last year, actually want to outright buy the company via its PE arm - Evergreen Coast Capital? And could the hedge fund’s actions lead a group of sponsors to join forces to pursue a club deal? Or rather, will a non-healthcare strategic come out of left field with a competing bid?  

At least a couple industry sources I spoke with expressed their belief that Elliott’s ultimate agenda isn’t to buy Athenahealth: “The only angle I see: they [Elliott] feel like they know someone that will buy it,” one source said. 

Another source agreed, tipping his hat to Elliott’s “intelligent pricing” … “They perfectly bid so the board would have to take it seriously … opening up the door for a big strategic review,” the source said. I mean, a 27 percent premium and the bid’s all-cash nature are both pretty compelling. 

Still, one source close to Elliott reiterated that the proposal is serious, and said the investor is fully prepared to lead this take-private should Athenahealth accept the offer. Elliott has in fact taken public companies private in the past. That includes Gigamon, the provider of traffic monitoring technology that it bought last fall in a deal valued at about $1.6 billion.

Looking at it from a PE perspective, the list of buyers that could put up the equity to fund a take-private of this size is minimal - even in a club deal. And the likelihood that a sponsor could do it on their own? “Can the math work? I don’t really see it,” one of the sources said. 

So how hungry is PE to buy a business - whose various challenges Elliott laid out in its letter - at a rich multiple well into the double digits? 

Of course, a strategic review could also result in discussions with strategic buyers, though sources agreed that a deal with HCIT peers like AllScripts (which is smaller) or Cerner is unlikely. Rather, Athenahealth is more apt to nail down a buyer in a non-healthcare corporate such as Salesforce, Google, Oracle, Amazon or IBM, they speculated. 

Another interesting dynamic is the fact that GE’s former CEO Jeff Immelt was recently brought in as Athenahealth’s chairman. Immelt, of course, has plenty of experience working with prominent activists - including Nelson Peltz’s Trian Fund

If Elliott’s efforts do ultimately lead to a sale, it would be its second homerun in healthcare as of late. Don’t forget, the billionaire investor - whom Bloomberg has called the most feared activist in the world - helped drive up the price tag for Stada last year. Bain and Cinven ultimately took the German drugmaker private for several billion dollars. 

An Elliott representative declined to comment, while an Athenahealth spokesperson reiterated that the company’s “management team and Board are reviewing the offer from Elliott and in due course will move forward with the best next step for the company”.

As activist shakeups typically go, it’s likely to be a drawn-out battle, which leaves you plenty of time to send me your thoughts, tips, feedback… Reach me at 

Speaking of high prices… 

I spoke to GTCR’s Ben Daverman the other day about the healthcare landscape and his Chicago firm’s approach. Here’s a snippet of the investor’s take on today’s price environment: 

I would characterize valuations in today’s environment as challenging ... In addition to higher purchase prices, we’re also seeing increasing pro forma adjustments, which is something that we are very focused on in this market. There’s also an increasing aggressiveness to which sellers are pushing the earnings of a business, and buyers are pursuing more opportunities on the basis of forward earnings. That introduces another level of risk into every deal. In order for us to be competitive, we need to get out in front of deals. 

Daverman also talked about how the firm’s executive-driven strategy lends to its specialization in niche healthcare segments and carveout transactions, among other things. Check out the full Q&A

Fund News

Keep an eye on another Chicago firm. Linden Capital’s fourth pool of capital just collected $1.5 billion, topping its $1.25 billion target. The fund will target middle-market healthcare companies in the services, medical products, specialty distribution and pharma sectors. 

That’s it for now. Have a great weekend, everyone. 



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