In October 1997, Advent completed a majority recapitalization of Managed Healthcare Associates (MHA), the leading US provider of contract purchasing services to long-term-care pharmacies. The company also provides its purchasing services to home health care, acute care, laboratory and alternate site locations.
At the time of our investment, MHA had 75% market share in the $5bn long-term-care pharmacy market. The market was highly fragmented and poised for continued strong growth because of the aging baby-boomer population. However, dramatic reductions in government reimbursement to the nursing home industry had a negative impact on the entire long-term care industry from 1998 to 2000, which in turn affected MHA’s results.
In 2001, Advent assisted in recruiting an experienced new CEO and CFO, who led a significant improvement in the company’s financial performance. MHA instituted many new programs and services for its members including structured sales teams that provide on-site support and help clients focus on lowering supply costs. From 2001 to 2003, earnings grew 25% per year, and the company significantly paid down its original acquisition debt. In 2003, MHA members purchased more than $4bn of healthcare products, consisting primarily of pharmaceutical services and supplies.
The turnaround allowed for a leveraged recapitalization in August 2004 involving a new equity investor, which provided capital for follow-on acquisitions. Advent sold a portion of its investment in the transaction and retained a significant minority stake in MHA. In August 2007, Diamond Castle Holdings acquired the company.