Spectrum Equity in 3.2x healthcare exit

Spectrum and Great Hill Partners will sell healthcare payments company Passport Health Communications for $850m after investing in the company in 2008.

Boston-based private equity firms Spectrum Equity and Great Hill Partners will sell healthcare payments company Passport Health Communications for $850 million, according to a statement.

The exit generates a 3.2x return multiple for Spectrum, according to a source with knowledge of the situation. Spectrum and Great Hill acquired a majority interest in Passport in 2008 in a deal valued at $232 million. 

London-listed information services company Experian will acquire Passport, which provides revenue cycle management services to healthcare providers. The company’s data and software products are used by more than 2,500 US hospitals and more than 9,000 healthcare providers. Passport is expected to generate revenues of $121 million in 2013, representing a 23 percent increase on 2012.

Spectrum invested in Passport from its $1 billion fifth fund, which has generated returns of 3x or more from five portfolio companies, including Passport. Three of the five companies – iPay, Ancestry.com and SurveyMonkey – have generated returns of more than 5x.

Spectrum is currently investing its $670 million Fund VI, which is more than 50 percent invested. The firm typically uses leverage in only about half of its investments, and focuses on three sectors: software and information services, internet and digital media and communications, media and entertainment.

Great Hill Partners closed its fourth fund on its $1.1 billion target in 2009. The firm invests in growth companies with low leverage across numerous sectors with enterprise values of between $100 million and $500 million, primarily in the US but also in Europe and South America.

Great Hill and Spectrum were not available for comment at press time.