April 2, 2014 / 4:20 PM / in 4 years

Exclusive: Advent's Connolly to merge with Goldman's iHealth Technologies

NEW YORK (Reuters) - Buyout firm Advent International Corp’s insurance payments auditing company Connolly LLC has agreed to merge with Goldman Sachs Group Inc’s medical claims company iHealth Technologies Inc, an Advent representative said on Wednesday.

The deal is the latest example of private equity’s interest in the U.S. insurance claims services sector, which has seen robust deal activity in the last few years as the industry’s outlook improves amid a modest economic recovery.

The Advent spokesman said the transaction is expected to close in the second quarter of 2014 but declined to comment on its value. Reuters reported last month that Goldman Sachs’ private equity arm and Oak Investment Partners were in talks with other private equity firms to sell iHealth for more than $1 billion.

The exact price agreed with Connolly could not be learned. Sources familiar with the auction for iHealth said Advent managed to substantially outbid other buyout firms thanks to synergies it identified with Connolly.

A spokeswoman for Goldman Sachs did not respond to a request for comment while Oak Investment Partners declined to comment.

Founded in 2001, Atlanta, Georgia-based iHealth provides analytics and services to contain medical and administration costs for more than 75 healthcare organizations, including insurance plans, according to its website. It was taken over by Goldman Sachs in 2006 for an undisclosed sum.

Founded in 1979, Wilton, Connecticut-based Connolly describes itself as the world’s largest privately held recovery auditing services firm. It reviews more than a trillion transactions each year, recovering $2 billion in overpayments in the healthcare and retail sectors, according to its website.

Advent took over Connolly in 2012, financing the deal with $370 million of debt and $363 million of additional equity, according to Standard & Poor’s Ratings Services.

The merger of Connolly and iHealth follows several other private equity deals in the sector in recent months. In February, for example, Starr Investment Holdings LLC, led by former AIG boss Maurice “Hank” Greenberg’, struck a $4.4 billion deal to buy health insurance claims processor MultiPlan Inc from private equity firms BC Partners Ltd and Silver Lake.

This followed KKR & Co LP’s $2.4 billion takeover of Sedgwick Claims Management Services Inc and $1.1 billion acquisition of Mitchell International Inc, and Apax Partners LLP’s roughly $3 billion acquisition of One Call Care Management Inc and Align Networks Inc.

Reporting by Greg Roumeliotis in New York; Editing by David Gregorio

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