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Private equity group Clearlake Capital is close to clinching a deal to buy a majority stake in healthcare software company Modernizing Medicine in a buyout that values the group at $5.3bn including debt, according to people familiar with the matter.
Clearlake, which has more than $90bn of assets under management, beat out rival bids from several other private equity groups after its owner Warburg Pincus put ModMed up for sale earlier this year, two people said.
ModMed operates electronic health records systems used by more than 160,000 speciality physicians and surgeons across the US.
As part of the deal, the two co-founders, who established ModMed in 2010, will maintain a minority shareholding. If the deal gets across the line, it will mark the most valuable leveraged buyout in the healthcare sector so far this year, in a bullish sign for dealmakers hoping for an uptick in sponsor-backed deal activity.
The deal was likely to be announced in the coming days, but it was possible that the timeline may slip, the people said. Warburg Pincus bought a majority stake in ModMed in 2017, giving the business an enterprise value of about $500mn, including debt. ModMed also counts private equity firm Summit Partners as a minority shareholder.
Warburg Pincus and ModMed declined to comment while Clearlake and Summit Partners did not immediately respond to messages seeking comment.
ModMed employs doctors to help design cloud-based patient records software tailored to different specialties, such as dermatology, orthopaedics and surgery, helping to smooth patient management and billing.
The company competes with other private-equity backed healthcare software companies, such as Athenahealth and NexTech Systems, which are also aimed at simplifying the record-keeping process for healthcare providers. Based in Boca Raton, Florida, ModMed was founded by software entrepreneur Daniel Cane and dermatologist Michael Sherling.
The stake sale of ModMed comes as private equity groups gear up for an uptick in exits and sponsor-to-sponsor sales, as interest rates fall. An analysis by accounting firm PwC found that between 4,000 and 6,500 private equity exits were delayed in the two years leading up to the end of 2024 because of a surge in interest rates.
Private equity groups have invested heavily in the healthcare IT sector in recent years as they see a ready customer base of insurers looking to make efficiency savings and healthcare providers grappling with financial pressures. Blackstone is also working on a sale of healthcare software provider HealthEdge, the Financial Times previously reported.
Clearlake, whose recent investments include stakes in English Premier League club Chelsea FC and a private credit unit from French asset manager Natixis, focuses on investments in the technology, industrials and consumer sectors.
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