Now that the Mitchell – Ingenix deal is in the open, the rumor mill – and the fact mill as well – is rife with discussion of pending acquisitions, investments, and mergers in the work comp managed care business.
Tops on the list is the pending Intracorp – Genex deal. This has been in the works for some time (fingers crossed, as I predicted CIGNA would sell IntraCorp months ago and I’m running out of time), but word is things are still progressing. That’s not to say it couldn’t fall apart, but at this point that doesn’t look likely. Genex, owned by a private equity firm, would certainly benefit from the additional scale added by an acquisition of competitor Intracorp. And now that forme CIGNA Chairman Ed Hanway is retired, there’s no one in the executive suite at the big healthplan preventing a deal.
Here’s hoping this one gets resolved soon; this has been dragging on so long it has to be exhausting for all parties.
Specialty managed care firm Universal SmartComp was on the block as well, with sources indicating there were two fairly serious potential buyers – one strategic and the other financial. Evidently things are at a standstill after one potential investor went deep into the due diligence process. This is always a tricky part of the deal, as the seller’s optimistic forecasts and desire for a high multiple come up against the potential buyer’s motivation to buy the property at a price that will make for big profits at sale.
While they may not be announced before the National Work Comp and Disability Conference, there are a couple of others in process, one a ‘platform’ type deal and the other an addition to a current business. These are a bit more iffy, but with the tax laws turning them into pumpkins at the end of the year (which is looking increasingly likely), owners may be anxious to get them done.
And that’s just what I know; I’m sure there are others out there yet to hit my radar.
Which brings up the question – why?
No clear answer, except work comp services is still very much a techno-phobic, mom-and-pop, decentralized industry, one that smart financial and strategic buyers believe will generate big profits through consolidation.
Perhaps.
It is also a hidebound, relationship-based and relationship-driven industry, a model that doesn’t ‘scale’ well, if at all. It is highly affected by regulatory risk, and subject to external influences beyond the ken of most in the industry, let alone outsiders evaluating a business model.
So yes, there are big opportunities. There are also big risks.
Oct
21
