New Mountain and Marlin Merge HealthComp and Virgin Pulse

New Mountain Capital and Marlin Equity Partners announced a plan to merge two portfolio companies in an attempt to create an end-to-end employer-sponsored health plan platform.

Blackstone is growing its AUM with a new focus on wealth management products

New Mountain-backed HealthComp, a health plan administrator, and Marlin-backed Virgin Pulse, which operates a digital wellness platform, are set to come together into a combined entity valued at around $3 billion. 

HealthComp, acquired by New Mountain in 2020, provides a claim management platform to employers and health plan participants, allowing them to track usage and make payments. Virgin Pulse, launched by Richard Branson's Virgin Group, provides tools for health plan sponsors to reduce costs while improving participant outcomes. Marlin acquired the business in 2018 and has since executed a series of add-ons. 

Virgin Pulse CEO Chris Michalak has been tapped to lead the go-forward company, whose core offerings will be focused on helping existing employer-sponsored health plans reduce costs and improve service. The deal consolidates a client list of more than 1,000 self-insured employers, with a footprint of 20 million covered lives. 

New Mountain will hold a majority stake in the combined business, while Marlin will roll over a portion of its Virgin Pulse stake to retain a minority position. Blackstone and Morgan Health, JP Morgan's healthcare investment unit, are also coming into the deal with minority stakes of their own. Blackstone's private credit arm will provide debt financing.

Healthcare Private Equity's Favorite Theme

The two sponsors are billing the business as the first "health platform-as-a-service" organization, believing that they've found a unique angle to solve health plan incentive misalignment that can reign in rising costs. While they may have a new approach, it's become a common thesis for private equity.

Healthcare investors have increasingly focused on cost containment strategies for employer-sponsored plans, with growing interest in third-party administrators or other unique alternatives. Industry operators agree that it's an area that's ready for disruption, but it's a tricky market to navigate — most targets are either poorly run, subscale, or with underwriting issues like customer concentration and lack of management capability.

The deal is expected to close in Q4.

Sam Hillier

Sam Hillier is a reporter at Transacted, covering private equity and investment banking. He previously spent time as an investment professional focused on direct buyouts, as well as an earlier strategic advisory stint.

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