November 27, 2019

Apervita to continue M&A spree next year, eyes sizable capital raise in 2021

This story appeared on Mergermarket on Nov. 21, 2019. Mergermarket is the leading provider of forward-looking M&A intelligence and data to M&A professionals and corporates around the world.

By Kyle LaHucik

Apervita, a software-as-a-service (SaaS) platform provider for value-based healthcare, will be acquisitive next year and looks toward a USD 75m-100m capital raise in 2021, said CEO Kevin Hutchinson.

The Chicago-based company merged in August with Boston-based Qcentive for undisclosed terms and Hutchinson replaced founder and former CEO Paul Magelli shortly thereafter. Magelli remains an advisor to the company. Hutchinson’s career prior to joining Apervita includes leading mobile care management solutions provider Prematics to a 2010 sale to NaviNet.

Moving into 2020, Apervita will continue to grow through M&A as it seeks US-based companies with complementary technologies, already with “a few on our radar,” Hutchinson said. Ideal targets would generate USD 5m-10m in annual recurring revenue, the CEO added.

Apervita’s cloud-based platform synthesizes claims and charts data to reduce administrative spend for 2,200 hospitals across the US, Hutchinson said. The company expects to boost the total to 3,000 in 1Q20, he added. The merger with Qcentive, which was advised by Matchpoint Partners, allows the combined company to provide a platform for both healthcare payers and providers, helping both stakeholders create value-based care contracts.

Following the merger, Apervita raised USD 22m in a November capital raise led by Optum Ventures. That funding will have an approximately 18-month runway and go toward expanding the company’s sales and marketing efforts, as well as product development, Hutchinson said.

Apervita will begin scouting a new lead investor next year as it looks to take in USD 75m-100m in early 2021, Hutchinson said. He declined to comment on valuation. The company will also look to current investors to participate in that fundraise, expected to further finance sales and marketing and R&D, he said.

The company has raised USD 62.2m to-date from Optum Ventures, Baird Capital, Pritzker Group Venture Capital, Math Ventures, Levy Family Partners, Illinois Venture and Wintrust.

Hutchinson said he sees the next decade as a strong period of growth for performance-based healthcare in the US, as providers increasingly transition from traditional fee-for-service care. Qcentive’s home state, Massachusetts, is the leader in value-based healthcare, with about 90% of providers adopting it, Hutchinson said.

Apervita was founded by Magelli in 2012, who remains a minority owner. Each of the company’s 80 employees have an options stake in the company, Hutchinson said. The company’s booked revenue will grow at about 2x in 2020 and top-line ARR will grow at 2-3x, Hutchinson said, declining to disclose current financials. The company is not yet profitable, he added. Baker Tilly provides accounting services, RM Partners Law is its legal counsel and Wintrust serves as commercial banker.