Huron Consulting Group's $325 million acquisition of the Studer Group will allow the larger firm to capture more of the small to midsize healthcare market, including the fast-growing physician practice space, executives said.
Studer's entire management team, who are closely identified as the heart of the firm's brand, will join Huron. Quint Studer, who founded the firm in 2000, has received a number of recognitions, including Modern Healthcare's first Marketing Visionary IMPACT Award.
Huron CEO James Roth stressed on an investor call that the deal was not part of a formal sales process, which would have been conducted if the principals were just seeking to exit the business. Instead, discussions began early last year after Huron was approached about a potential tie-up.
“The combination came together because the groups wanted it to come together,” Roth said. “This was a very solid, strategic fit.”
Chicago-based Huron officials said on the call that the deal, expected to close next month, will create a company with $903.8 million in pro forma revenue. Studer generated $78 million in fiscal 2014 revenue, according to a Huron investor presentation.
The deal will be funded mostly in cash but includes $2 million in Huron stock to Studer's principals, founder Quint Studer and CEO Barry Graham Porter.
Private equity firm JMI Equity has owned 70% of Pensacola, Fla.-based Studer since 2011.
The two consulting firms have some areas of overlap, but Huron plans to operate them as separate divisions for the time being, said Gordon Mountford, Huron's executive vice president of healthcare.
Huron mostly focuses on project work for its clients, but with Studer, the firm could expand those contracts into multi-year relationships, he added.
In addition, the deal will allow Huron, which mostly focuses on larger healthcare clients, to expand into the small to mid-size market, tapping into Studer's client roster of community hospitals, for-profit chains and physician practices. The physician space in particular has been Huron's fastest-growing market, Mountford said.
The purchase price represents a multiple of 11.8 times Studer's projected earnings before interest, taxes, depreciation and amortization, or 10 times its projected 2015 EBITDA.
Studer's annualized revenue growth rate was 12% between 2010 and 2014, according to the investor presentation. The firm has 750 clients and a staff of 237.
Healthcare is Huron's largest division. It accounts for about a third of its revenue and had an operating margin of 38.3% in the nine months ended Sept. 30.
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