The Align Networks deal is done

Work comp PT network company AligNetworks has been sold to private equity investor General Atlantic. While terms weren’t disclosed, sources indicate the company went for a premium well above the ‘usual’ 6-7 multiple of EBITDA.
Butch Hofstetter and his team did a remarkable job, building a serious competitor to industry founder (and HSA consulting client) MedRisk and Universal SmartComp in a few short years. Leveraging their relationships, Butch and his team went after adjusters, relying on those relationships to drive transactional volume. The focus was a success, and the numbers certainly showed they’d carved out a solid niche.
While there were at least two strategic buyers in the mix, General Atlantic made the winning bid, leaving those entities looking to add to their portfolios to keep looking. While the GA people are undoubtedly very, very smart, this is also their first major foray into what is a pretty weird business space. My bet is they use of their additional capital (along with debt) to invest in IT and operational infrastructure. Align’s been able to handle their volume to date with a pretty thin operation, but they’ll need to invest if they want to move beyond pleasing adjusters to nailing down deals with some of the big boys.
That’s not to say Align hasn’t begun some relationships with larger payers; emphasis on the ‘begun’. However, that market has long been MedRisk’s sweet spot, and anyone who knows CEO Shelley Boyce knows taking share away from MedRisk will be a serious challenge. MedRisk has been working very hard to consolidate relationships with current large payers, while building the infrastructure necessary to deliver the same savings results to individual adjusters.
Regardless, this is good news for payers. More focus on physical medicine, which accounts for about a fifth of all workers comp medical spend, is a welcome thing indeed. And competition, especially between two such organizations, will produce better outcomes, more efficient processes, and lower costs for all work comp payers.