Sequel Youth and Family Services, a growing behavioral health provider, will go public in April after it is sold to a New York acquisition company for $423 million.
Global Partner Acquisition Corp. has been vetting companies to acquire and take public through the shell company it created after raising $155 million through an initial public offering 18 months ago.
In a phone interview, GPAC CEO Paul Zepf said they chose Sequel from among 60 companies because of its clinical programs, its track record for growth and the increasing demand for behavioral health services at a time of greater public awareness of mental health intervention.
Under the terms of the deal, Sequel common equity holders will receive $105 million in cash, newly issued Sequel common units exchangeable for 4.5 million shares of GPAC common stock and GPAC warrants to purchase 3.3 million shares of GPAC common stock.
Sequel preferred equity holders also will receive a cash distribution of $30 million and $62.2 million in newly issued Sequel preferred units.
Huntsville, Ala.-based Sequel specializes in behavioral health for adolescents and young people, but has been growing its adult services segment, said CEO John Stupak. Sequel has 44 programs, including those for people with autism.
The company posted revenue of $208 million in fiscal 2016 ended June 30. But with three acquisitions after June, revenue in fiscal 2017 is expected to reach $254 million, he said.
Sequel's adjusted EBITDA also is expected to increase in 2017 to $39.7 million compared with $31.3 million in 2016.
Sequel's programs run the gamut from in-home services and outpatient to inpatient psychiatric care. The company operates in 19 states. But its 9,000 clients are drawn from 42 states because of out-of-state referrals coming from the more than 500 payers and providers across the country, said Jay Ripley, Sequel co-founder and board chairman.
Sequel has an active pipeline of acquisition targets, especially among behavioral health companies with annual revenue between $20 million and $100 million, Ripley said.
Those are a little smaller than the companies preferred by behavioral health giants such as Universal Health Services and Acadia Healthcare, he said.
Ripley said Sequel has been paying a multiple for acquisitions of about 5.5 times EBITDA. But Sequel has been able to quickly grow EBITDA of the acquired companies through its standard business practices and expanding their clinical programs, he said.