Jan 10, 2022 - Economy & Business

A $12.3B union: R1 RCM buys Cloudmed

Animated GIF of two hospitals merging, with a dollar sign appearing in between them

Illustration: Sarah Grillo/Axios

R1 RCM is buying New Mountain Capital's Cloudmed in an all-stock transaction valuing the combination at approximately $12.3 billion as of Friday's market close, sources tell Axios

Why it matters: The pandemic is accelerating growth in the provider revenue cycle management space, and Cloudmed brings a lot of tech and data to the RCM player with arguably the most scale.

By the numbers: The transaction values Cloudmed at some $4.1 billion, including $857 million of net debt. That equates to 14.8x Cloudmed's 2022 estimated adjusted EBITDA.

  • $4.1 billion is more than 13x the the platform's roughly $300 million enterprise value when NMC first merged IMA Consulting and Revint Solutions in 2017, one source says.
  • NMC and affiliates will own 30% of the combined company, becoming the largest shareholder and taking three board seats.

Be smart: For NMC, the Cloudmed business model has similarities to Equian, which it sold in 2019 to UnitedHealthcare Group at a total enterprise value of $3.2 billion.

  • Equian, which provides payment integrity technology, helps payors find payments owed to them. Cloudmed, focused on revenue integrity, does the same thing for healthcare providers.
  • M&A proved a core value creator for both. NMC added Cloudmed to the initial platform in 2018, took on its name and then merged with Triage last year, among other tuck-in deals.

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