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Scoop: MSCP's Clarity Software Solutions hits the market

Jul 18, 2022
Illustration of a stethoscope with a high price tag

Illustration: Eniola Odetunde/Axios

Morgan Stanley Capital Partners has launched a sale process for Clarity Software Solutions, three sources tell Axios.

What's happening: Three-and-a-half years into its investment, MSCP is putting the Madison, Connecticut-based health care communications company back on the auction block.

  • Triple Tree, which advised Clarity last time around, is mandated again for sell-side advice, sources say.

By the numbers: Clarity generates EBITDA and revenue of approximately $30 million and $100 million, respectively, two sources say.

  • Some 40% of the business sells into payors, which sponsors are likely to deem attractive, one of the people says.
  • The company says it partners with plans that collectively cover more than 230 million covered lives, with 84 million communications distributed annually to members nationwide.
  • Additionally, it says it processes over 164 million data records each year.

How it works: In the business of health care document management, Clarity facilitates provider and payor communication with members via cloud-based software.

  • The company tracks, processes, prints and distributes health care ID cards, member guides, EOBs (Explanation of Benefits), and payment correspondences, among other materials — ensuring proper compliance and adapting to changing business needs.

What they're saying: Clarity is probably a sponsor deal, but other potential buyers could be strategics with a printing business — like Zelis Healthcare, backed by Bain Capital and Parthenon Capital, or Change Healthcare, one source notes. (The latter may have its hands full as the trial for its proposed $13 billion merger with UHG approaches).

Catch up quick: MSCP, which is part of Morgan Stanley’s about $10 billion Private Credit & Equity platform, acquired Clarity in January 2019.

  • Constitution Capital Partners joined as a minority investor.
  • As a part of the transaction, Churchill Asset Management provided $90 million of debt financing in the form of a $15 million revolving credit line and a $75 million term loan to support the deal, per PitchBook.

Yes, and: For MSCP, Clarity represented the first health care deal from its $1.5 billion midmarket fund, North Haven Capital Fund IV — coming nine months after recruiting Steve Rodgers to lead a new health care effort for the platform.

MSCP declined to comment and Triple Tree did not return requests for comment.

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