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THL brings on Allscripts vet Paul Black

Oct 11, 2022
Illustration of a heart rate monitor screen with the line forming a red cross.

Illustration: Brendan Lynch/Axios

Thomas H. Lee Partners hired former Allscripts CEO Paul Black as a consultant to help source and perform due diligence on new investment opportunities in health care IT, the firm tells Axios exclusively.

Why it matters: The move highlights THL's intention to push deeper into health tech — a segment where deal volume has been relatively muted the last few months in private equity land.

What they're saying: "Any time that there's trouble in the marketplace, or issues, that's a good time to be in with both feet," says Black, who stepped down from Allscripts in May after nearly a decade. "Where other people might be pressing the pause button, I think that's a time to press the accelerate button."

Catch up quick: THL hired Shahab Vagefi to amplify health tech efforts about a year ago, from Martis Capital, where as a founding partner he worked on deals including HHAeXchange and Epic Systems.

  • In June, Harris Williams health care IT banker Sam Hendler joined the THL roster to head health care business development.
  • THL in March struck a $1.5 billion-plus deal for health care data enablement company Intelligent Medical Objects, following February's $50 million growth investment in health care automation company Qventus.
  • The firm also owns EHR platform Nextech.

Zoom in: THL historically has heavily skewed toward provider-focused tech, where Vagefi sees "great opportunity to [continue to] do things better, faster and cheaper."

  • Black and Vagefi say wage inflation in concert with the labor crisis, and the potential resulting pressure on volume, lend to compelling investment opportunities.
  • These include revenue cycle outsourcing (and other outsourcing services); technology that maximizes operational productivity of the workforce; clinical operations; staffing solutions; third-party process automation; and the enablement of value-based care.
  • Similarly, Black sees interest from insurance companies to take out some of the manual labor that’s required inside of their organizations for claims processing.

Yes, and: THL is actively mining opportunities in pharma tech, including investments focused on data collection or companies that help make drug commercialization more efficient.

Between the lines: Health care companies are more willing to turn outward in this environment — and that's where tech comes in.

  • "There's a fair amount of angst and pressure in the market," Black says. "People that are in that mode are typically looking for other solutions versus doing the same thing they’ve done for the last 100 years."

Reality check: Vagefi has started to see health tech valuations come down, with recent trades at "mid-teens EBITDA type multiples," as opposed to the 20x-plus commanded by companies in recent years.

  • As credit markets remain shaky and interest rates continue to rise, "I think you're going to see much more rationalization going forward," although "A-plus" assets may be an exception, Vagefi says.

Flashback: Reflecting on the several years he ran and built out Allscripts, Black shares two big learnings:

  1. Have a solid vision for the future — and make sure it's executed over a multiyear timeframe from a capital allocation standpoint.
  2. Maintain market relevance. Allscripts was more than "just a good EMR company," Black says, with significant R&D spent on data, the consumer, interoperability, payors and life sciences. "Different platforms that were EMR-agnostic ended up being a big part of what the Allscripts story is," Black says.
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