Deal making is getting more creative in the time of COVID-19. Mednax, Inc. (NYSE: MD) sold its anesthesiology group, American Anesthesiology, Inc., to North American Partners in Anesthesia (NAPA), a portfolio company of American Securities, for $50 million.
In an 8k filing on May 6, Mednax added a few terms to that $50 million price. It retained the accounts receivable of American Anesthesiology, which, net of various other working capital items, which were approximately $110 million as of March 31, 2020. It also retained a contingent economic interest in the success of NAPA with a value ranging from $0 to $250 million based upon the multiple of invested capital returned to NAPA’s owners upon exit of the investment. Mednax will begin to receive a payment on its economic interest at an exit multiple of 2.0, with such payment reaching $250 million at an exit multiple of 5.0.
Launched in 1979 by Dr. Roger Medel (who is still CEO), Mednax focused exclusively on pediatrics and neonatology practices until 2007. That’s when the company branched out to add anesthesia practices, but not before laying some careful groundwork. Several years ago, former Stifel Nicolaus analyst Rob Mains told us that Mednax’ executive team spent a lot of time examining new areas of practice to move into.
According to our DealSearchOnline database, Mednax acquired more than 40 anesthesia practices between 2009 and 2016, growing to more than 1,400 physicians and 2,025 anesthetists. 2016 was the last year the company invested in anesthesia groups.
In 2015, a new area was added with the $500 million acquisition of Virtual Radiologic Corporation (ticker: VRAD). The deal added a network of 350 radiologists, more than 75% percent of whom are subspecialty trained. With that deal, Mednax gained radiology coverage in more than 2,100 healthcare facilities across all 50 states and international markets. Since then, the company has added more than 10 large radiology practices, including Radiology Alliance in Nashville (64 physicians), Synergy Radiology Associates in Houston (92 physicians), and Boca Radiology Group in Boca Raton, Florida (36 physicians). Financial terms weren’t disclosed with any of these announcements.