The Transaction

Principals of Founders Investment Banking, LLC acted as lead financial advisor in a minority recapitalization of Health Information Designs, Inc. (“HID”) and HDI Solutions, Inc. (HDI).

The Companies

Headquartered in Auburn, Alabama, both HID and HDI specialize in the data analytics segment of information technology. The companies share common ownership as well as management and capital resources.
HID focuses on the healthcare sector and is a market leader in providing cost minimization software and services that also promote an improvement in the quality of patient care. The Company has become a key partner to both government and private payers in the healthcare payment chain. Since 2009 HID has experienced rapid top and bottom line growth and sees its business velocity accelerating at a time when broader market forces seem to point to the beginning of a longer term increase in demand for their best of breed cost containment products and services.

As a sister company, HDI focuses on the non-healthcare sector, with a primary product line in performing predictive analytics and administration of state government mandated automobile liability programs. The Company also shares many of the same core processing competencies and expertise as HID. Relying on these core competencies, HDI has also experienced strong growth recently. However, with lower revenues than HID, it was not positioned in the market to command a premium valuation.

The Objective

The Companies were founded by the late Dr. Ty Gibson, an entrepreneur and previous head of Auburn University’s Division of Pharmacy Administration. Through the efforts of Dr. Gibson and current CEO Rob DiBenedetto, HID has positioned itself as a major player in the provider-patient claims payment system. As rising healthcare costs have continued to gain national attention, HID has become ideally positioned to experience significant growth and needed to professionalize the organization in order to take advantage of prime market conditions. While possessing similar strengths, HDI has operated on a smaller resource base and with less attention to strategic planning.
The companies have continued to be wholly owned and managed by Dr. Gibson’s family, with the business being their largest asset. The family desired to de-risk their equity position in the business by “taking some chips off the table” and locating the best-fit business partner who shares their values and vision for growing the businesses and expanding their platform during this unique and opportunistic point in time. In addition, because the family believes the future opportunity in the business remains very sizeable, they prefer to maintain majority ownership in the resulting entity.

The Solution

In order to achieve a level of scale valuation that neither of the businesses would have been capable of realizing individually, the Principals of Founders advised the family to market the two businesses as separate divisions of a consolidated entity. Employing a thorough market-oriented process, Founders was able to help the family select the ideal private equity partner who saw the value of both HID and HDI and shared the family’s vision for growing them. Founders was then able to structure a very favorable recapitalization transaction that fully accomplished the owners’ multi-faceted goals, which included:

  • Provide significant liquidity that allowed the owners to diversify their personal wealth;
  • Maintain a controlling equity position in the recapitalized company that provides them with significant upside through value appreciation (2nd bite of the apple);
  • Retain full operational control of the company;
  • Attract an accomplished and experienced value-add private equity partner that is well positioned to assist in guiding the Company through its imminent growth phase including the financial and human capital to support growth initiatives, potential acquisition opportunities and the overall strategic planning process;
  • Create a vehicle to extract additional liquidity from the Company based on future earnings performance

The Principals of Founders, acting in the capacity of registered investment banking agents, successfully represented HID in this transaction.

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