Summit Partners’ $1.2 Billion Sale of ABILITY Network

Ropes & Gray Counsels Summit Partners on the deal

Inovalon (Nasdaq:INOV), a leading technology company providing advanced, cloud-based platforms empowering a data-driven transformation from volume-based to value-based models across the healthcare ecosystem, today announced it has entered into a definitive agreement to acquire ABILITY® Network (“ABILITY”) for aggregate consideration of $1.2 billion in cash and restricted stock, creating a vertically-integrated leader in cloud-based enablement of data-driven, value-based care. The transaction is expected to close in April 2018, subject to customary closing conditions and regulatory approvals and is expected to be accretive to Inovalon’s Non-GAAP diluted net income per share in 2018.

ABILITY is a leading cloud-based Software-as-a-service (SaaS) technology company helping to simplify the administrative and clinical complexities of healthcare. Through the myABILITY® software platform, an integrated set of cloud-based applications for providers, ABILITY provides core connectivity, administrative, clinical, and quality analysis, management, and performance improvement capabilities to more than 44,000 acute, post-acute and ambulatory point-of-care provider facilities.

The extensive datasets, on-demand compute capability, advanced analytics, and broad healthcare ecosystem connectivity enabled by the Inovalon ONE™ Platform will provide a significant expansion of application offerings within the myABILITY® software platform while also expanding the nature and reach of high-value solutions for Inovalon’s existing payer, pharma, and device client-base.

Upon closing, the combination of Inovalon and ABILITY creates a vertically integrated cloud-based platform empowering the achievement of real-time, value-based care from payers, manufacturers, and diagnostics all the way to the patient’s point of care.

Inovalon has agreed to acquire ABILITY for $1.2 billion, comprised of $1.1 billion in cash and $100 million in restricted Inovalon stock (translating into 7.6 million shares, based on the 45-day trailing average stock price for INOV as of March 5, 2018 of $13.16), equating to an acquisition price of 16.6x ABILITY’s LTM December 31, 2017 Adjusted EBITDA of $72.1 million. Inovalon will finance the transaction through the aforementioned 7.6 million shares of restricted equity, cash on hand, and borrowings from a new $980 million term loan for which a commitment has been obtained, and which will also be used to pay off and replace the Company’s existing credit facility indebtedness. Morgan Stanley Senior Funding, Inc. is providing the financing commitment for the acquisition and will lead the financing. The Company will continue to have strong liquidity with approximately $75 million in cash, an untapped $100 million revolver, and a pro-forma net debt to Adjusted EBITDA ratio of approximately 4.1x at year-end 2018, dropping to approximately 3.3x at year-end 2019 in the setting of the Company’s strong cash flow. The transaction has been unanimously approved by the Inovalon and ABILITY boards of directors and is not subject to a financing contingency or approval by Inovalon’s stockholders.

The Ropes & Gray team is led by private equity partner Amanda Morrison (Picture), finance partner Byung Choi, tax partner Pamela Glazier and benefits partner Loretta Richard.

 

Involved fees earner: Amanda McGrady Morrison – Ropes & Gray; Byung Choi – Ropes & Gray; Pamela Glazier – Ropes & Gray; Loretta Richard – Ropes & Gray;

Law Firms: Ropes & Gray;

Clients: Summit Partners;

 

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Author: Ambrogio Visconti