Hg gears up for MEDIFOX DAN exit

Houlihan Lokey is advising on the sale process, three of the sources said. The auction is expected to kick off in April, with sale documents yet to be circulated, the sources said.

The company is already drawing inbound interest from potential bidders, two of the sources said, with another source noting that larger private equity funds are expected to look at the asset.

MEDIFOX generates EBITDA in the range of EUR 35m-EUR 40m, the sources said. Its cash EBITDA is closer to EUR 40m, according to one source.

The company has performed “incredibly well” and grown substantially under Hg’s ownership, including via add-on acquisitions, the sources said. At the time of Hg’s investment, MEDIFOX’s EBITDA was around one-third what it is today, a fifth source familiar with the situation said.

In 2020, MEDIFOX reported EUR 15m EBITDA and a sales increase in the “low” dougle-digit percentage range, according to its most recently available public filings. The company has more than 700 employees, according to its website.

The process is expected to be competitive given momentum in the healthcare tech sector and the fact that Hg has already optimized MEDIFOX’s software, two of the sources said. Given this backdrop, price expectations could reach 25x EBITDA, the second source said.

However, a new owner might find it difficult to expand MEDIFOX outside Germany due to differences in national healthcare and insurance systems, the sources said.

“It’s not software that super easily crosses borders,” one source said. “They are very tailored to how care payments work in Germany, and there are quite a few differences even within Western Europe.”

These difference mean MEDIFOX's products cannot easily be sold in countries like France or the UK, where the participant setup varies considerably to Germany, the same source continued.

Founded in 1994 and headquartered in Hildesheim, MEDIFOX is a provider of software solutions to support care providers with services including resource and route planning, care and support documentation, management information systems, as well as billing, factoring and administration services, according to Hg’s website. It has more than 8,000 customers and almost 100,000 users.

Hg acquired a majority stake in MediFox in 2018 from ECM Equity Capital Management for an undisclosed sum. The company then posted EUR 13.5m EBITDA and had 265 employees, according to Mergermarket data.

Under Hg’s ownership, MediFox merged with German healthcare management software provider DAN Produkte in January 2020 and rebranded as MEDIFOX DAN. Other add-on deals completed include its acquisitions of German software company Multiflex-Solutions, German e-health company Töchter & Söhne, and German software developer for inpatient care facilities Loepertz Software, all in 2021 for undisclosed sums.

Earlier this year, it also acquired adiutaByte, a German planning and optimization software company, and Hamburg-based e-learning company smartAware.

There is scope for further add-on activity, even accounting for MEDIFOX’s buying spree with Hg, one of the sources said.

The German market is very fragmented but consolidating, and MEDIFOX is one of the larger players in the German care sector, with a high market share and focus on serving the “lower end” of the SME space, a sector banker said.

Competitors include opta data, a German billing software and services company, and myneva, a German software developer for social care institutions, the sector banker added.

MEDIFOX also competes with Connext Communication, a German software provider for nursing and care facility management, one of the sources said.

Summa Equity acquired a majority stake in myneva last year.

Houlihan Lokey and Hg declined to comment. MEDIFOX DAN did not respond to requests for comment.

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