Eleanor Kennedy | Nashville Business Journal
Health-tech startup Change Healthcare wasn’t really for sale.
But take two paths crossing at a conference in California, add a late Friday afternoon meeting and a Father’s Day phone call, and you get a $135 million deal that’s soon followed by a massive rebranding and, most recently, plans for another mega-merger slated to shake up the nation’s health-tech landscape.
Doug Ghertner, formerly CEO of startup Change Healthcare, now president of engagement solutions and chief sales officer for the company formerly known as Emdeon (but today also called Change Healthcare, soon to complete a merger with the IT division of McKesson Corp. that will create a new, as-yet unnamed company — it’s a lot to follow, I know) pulled back the curtain on the blockbuster 2014 deal during a Tuesday panel focused on the funding environment for new health care ventures in Nashville. The event, run by the Nashville Health Care Council and angel group Nashville Capital Network, also featured Clay Richards, another health care startup head with a big sale under his belt, and two of the investors behind his and Ghertner’s companies.
Like Change, Richards’ NaviHealth wasn’t looking to sell. But when publicly traded Cardinal Health, eager to enter the post-acute care management space, offered a deal worth more than $400 million(one of two unsolicited bids made to the company) at a premium that brought hefty returns to backer Welsh, Carson, Anderson & Stowe, it was hard to turn down that deal, said Tom Scully, general partner with the New York-based private equity firm.
“We didn’t have too much choice but to de-risk our investment,” Scully said, though he added he believes in the business and “would’ve personally stayed in for the long haul.”
In Change’s case, the young company had been exploring a “commercial relationship” with what was then Emdeon, wherein the two companies might partner on bringing some products to market. After Ghertner ran into Emdeon CEO Neil de Crescenzo at a conference in California, however, a potential sale started to come up, and the two soon met — at 5 p.m. on a Friday, Ghertner said — to discuss it. Soon, de Crescenzo called up Ghertner on a Sunday afternoon (Father’s Day), and the wheels really started moving forward, culminating in the late 2014 sale, which closed only 63 days after the two signed a non-binding letter of intent.
Although that timetable’s quite speedy, Ghertner said Change was actually at a timing advantage during the process, as the company had plenty of money behind it thanks to a fortuitously timed round of venture debt. Although the timing wasn’t intentional, Ghertner said, having access to that capital meant Change, while negotiating, “didn’t really have any pressure” to iron things out in haste.
In fact, he said, some members of the board thought the company should stick it out on its own and “roll the dice” on future growth.
“The decision of the board was not unanimous” Ghertner said.