M&A – what’s happening next in the work comp world?

While there weren’t a plethora of deals announced at RIMS last week, that’s not due to a lack of activity.
The pending changes to tax rates (without another extension, capital gains will go up at the end of 2012) make it imperative that deals get closed before 12/31/2012. But it’s not just the tax code that’s driving activity. The continued soft market and drop in frequency during the recession have been particularly tough on TPAs; many work comp service companies are also hurting, while others look to be nearing the end of their initial run and readying themselves for the ‘equity event’.
Among TPAs, xChanging is nearing a deal to sell its former Cambridge TPA. A couple of suitors are still in the mix, both are big TPAs looking to get even bigger. Expect this to get done within a month or so, and at a price that will surprise.
The Align Networks deal is moving forward as well, with the field of potential acquirers now narrowed down. Financial suitors are rumored to be quite interested, but there remains interest from some looking to combine Align with other assets. I’m speculating here; my guess is it will be a financial buyer smitten by the company’s rapid growth and rosy outlook.
Unless… someone buys both Align and Universal SmartComp and puts them together in a bid to topple MedRisk (current HSA consulting client) from its long held position as the dominant player in the work comp physical medicine sector. I don’t see how that would work as the business/operational models are markedly different. Moreover, a lot of the ‘value’ of the assets lies in their network contracts, which would be redundant in any deal.
There are a couple of other deals rumored to be in the offing, but nothing verifiable as of yesterday. We’ll keep you posted.
Finally, there were rampant rumors at RIMS that one of the big PBMs was about to be sold; not true.