Illustration: Aïda Amer/Axios
After two add-on deals in the last three months, Zelis Healthcare, backed by Parthenon Capital and Bain Capital, sees larger M&A opportunities, CEO Amanda Eisel tells Axios.
Why it matters: Zelis has primarily pursued add-ons since it merged with RedCard in 2019 with a $5.7 billion valuation. A large-cap deal by Zelis would throw some fuel on an otherwise tepid M&A market.
Driving the news: Last week, Zelis acquired Payspan, a payment and reimbursement automation provider, just three months after scooping up Payer Compass for $180 million.
- Eisel characterized both transactions — as well as Zelis’ acquisition of Sapphire Digital in 2021 — as add-ons to its core payments business but declined to discuss financials.
What they’re saying: Eisel said larger-scale deals could be on the table, particularly given the uneven capital markets.
- “On a broader scale, a pullback in the market is interesting for transformational M&A,” Eisel says.
- Companies' exit options are dwindling as both public and private markets are squeezed, which could position Zelis well for a larger-scale deal, Eisel says.
Zoom in: The acquisition of Payspan gives Zelis capabilities around managing insurance premium payouts, says Yusuf Qasim, president of payments optimization.
- Zelis was courting Payspan for years and engaged in earnest deal conversations this year, Eisel tells Axios.
By the numbers: Zelis generates around $450 million in EBITDA, per an August Axios report.
- Eisel declined to comment on the figure.
State of play: Other scaled health payments players include ClaimsXten, which TPG acquired from Change Healthcare for $2.2 billion last month.
- The Claims auction was well-attended and competitive, and yielded a deal Eisel calls “incredibly validating.”
The big picture: Last year’s market was focused on growth potential, with health tech players fetching rich revenue multiples. This year, it’s a different game.
- “All of a sudden, the market again favors profitability and is more disciplined in thinking about valuations,” Eisel says.
- “Any time you shift the landscape for what’s valuable that quickly, it creates buying opportunities for well-capitalized companies,” she adds.
- As a buyer, Zelis has also tended to focus on profitability when vetting targets, Qasim says.
What we’re watching: If and when the public markets reopen, Eisel says, Zelis and its backers will weigh an IPO or a dual-track process among its exit options.