Mumbai-based Firstsource Solutions, a pure-play business process outsourcing provider, has acquired US-based MedAssist Holding for $330 million (Rs 1,353 crore).
The deal is subject to regulatory approval under the US health services research statute.
It is the second-largest acquisition after Wipro bought out Infocrossing for about $600 million.
Firstsource has raised a debt of $275 million at 2.5-3 per cent above the LIBOR (London Inter-Banking Official Rate) for a five-year term. The balance $55 million will be paid through internal accruals. The company has a cash reserve of $80 million (around Rs 328 crore).
"This is a strategic investment for us. Firstsource already has a significant presence in the payor (insurance company end) side of the market of the US healthcare back-office sector and this acquisition will give us access to the equally large provider (hospitals end) side," said Ananda Mukherji, managing director and CEO, Firstsource.
This will also allow the company to cross sell some of its processes in the future.
Income from services to healthcare clients represented 13.7 per cent of Firstsource's revenues for the quarter ended June. This acquisition will increase healthcare's share of revenues significantly as total revenue for 2006-07 was Rs 840 crore (Rs 8.4 billion) and the US company had revenues of about $100 million (about Rs 410 crore).
"We have been pursuing this for many months now and this will add 50 per cent to our last year's revenues. We had said we would grow at 50 per cent," Mukherji said.
MedAssist is a debt-free company with a top line of $99 million. Its EBITDA margins are in the range of 22-24 per cent.
MedAssist, headquartered in Louisville, Kentucky has 1,400 employees and is a pan-American provider of revenue cycle management services to the healthcare industry. It has over 800 clients, including hospitals, large physician groups and alternate site providers.
The hospital care business in the US amounts to approximately $700 billion and administrative costs are estimated to be 14 per cent or $100 billion, which is a huge opportunity.
"This acquisition will also give us enough scope to enter the European market. Though the market is different, the provider side is similar. Our UK team has already been asked to go through the assets," said Raju Venkatraman, president and COO, Firstsource.
Firstsource has over 14,000 employees and operations in India, the US, the UK, Argentina and the Philippines.