DFW Capital Partners and PineBridge Investments have acquired Covenant Surgical Partners, an acquirer and operator of single and limited-specialty ambulatory surgical centers. Iroquois Capital, a founding investor in Covenant, also invested alongside DFW and PineBridge.
DFW sourced and led the transaction, partnering with PineBridge Investments and Iroquois Capital to acquire a majority interest in Covenant via a $35 million senior preferred equity investment, the proceeds of which were used to facilitate the acquisition of five new ambulatory surgical centers and an increase in its senior credit facilities to support future acquisitions. Concurrent with the equity funding, SunTrust Bank led a $76.5 million senior credit and acquisition facility for Covenant.
Covenant Surgical Partners operates 19 ambulatory surgical centers (ASCs) focused on certain core medical specialties that are driven by both managed care cost containment and the ageing of the population – principally gastroenterology, ophthalmology and interventional pain management. Covenant’s recent model has been to acquire majority interests in single or limited specialty ASCs across a broad geography, with a significant minority investment retained by the center’s affiliated physicians or physician groups. Covenant seeks to bring new systems and procedures to bear in such acquired centers, and also consolidates financial, administrative, regulatory, contracting and human resources management functions – allowing its affiliated physicians to concentrate on the practice of medicine and efficient scheduling and utilization of the centers. Covenant Surgical Partners is headquartered in Nashville (www.covenantsurgicalpartners.com).
Covenant Surgical Partners is led by Rick Jacques, its founder and CEO. He formerly was SVP of Corporate Development at Amsurg (NASDAQ:AMSG), the nation’s largest consolidator and operator of ASCs. “We are excited to work with DFW and PineBridge to fulfill our long-term vision of building the leading single and limited-specialty ASC operator in the industry. With our increased equity capital base and senior credit capacity, as well as critical scale achieved with the concurrent center acquisitions, we have developed a formidable platform for further growth,” said Mr. Jacques.
DFW was attracted to the Covenant Surgical Partners opportunity based on its long-term view that lower-dollar surgical procedures (like colonoscopies, cataract surgeries, etc.) will continue to move toward lower-cost, non-hospital settings given their superior cost profile for payers, convenience of experience for patients, and clinical and logistical benefits to providers. Covenant has proven its ability to improve revenues at its acquired centers by providing patient marketing resources and programs as well as providing access to improved ancillary services. Further, DFW believes that the increasing complexity and regulatory environment facing smaller operators creates a compelling consolidation opportunity over the coming several years where Covenant can alleviate financial and operating pressures on physicians by acquiring a majority interest.
“We are delighted to partner with Rick Jacques and the Covenant team in this exciting investment opportunity. We have been students of the surgery center space for several years, and were fortunate to uncover Covenant – a company with a superior integration and business model and focused on a segment of the procedure market that stands to benefit from demographic and economic forces currently at work within the overall healthcare market” said Keith Pennell, DFW’s Managing Partner.
DFW Capital Partners invests in lower middle market companies. Sectors of interest include outsourced healthcare and business services, including clinical services, specialty distribution, automated dispensing and pharmacy technology. DFW is headquartered in Teaneck, NJ, and maintains an office in Chevy Chase, MD (www.dfwcapital.com).
PineBridge Investments manages $69 billion in assets for institutional and individual clients in listed equity, fixed income, private equity and hedge fund markets. The firm has approximately 800 employees in 32 countries and is based in New York (www.pinebridge.com).
Iroquois Capital Group is a merchant banking company led by business executives who have been CEOs and have extensive finance and M&A experience. Using this experience, Iroquois identifies and works with companies in the healthcare and financial services industries, sometimes investing its own capital and the capital of its more than 500 investing clients. The firm is based in Nashville (www.iroquoiscapitalgroup.com).
© 2013 PEPD • Private Equity’s Leading News Magazine • 1-25-13
