Exclusive-Healthcare software vendor NextGen explores sale, sources say

By David Carnevali

NEW YORK (Reuters) -NextGen Healthcare, a provider of software that helps manage patients' records, is exploring options that include a sale of the company, according to people familiar with the matter.

The U.S. company, which does not maintain headquarters as many of its employees work remotely, has hired investment bank Morgan Stanley to advise it on its discussions with potential buyers, the sources said.

There is no certainty that NextGen will reach a deal to sell itself, the sources added, asking not to be identified because the matter is confidential.

NextGen and Morgan Stanley did not immediately respond to requests for comment. NextGen shares rose 10% to $18.01 on the news in afternoon trading in New York on Wednesday, giving the company a market value of about $1.2 billion.

Dealmaking in the healthcare sector has picked up as companies push to gain scale and cut costs, and private equity firms bet on an industry that has traditionally proved resilient in economic downturns, which some on Wall Street worry is looming.

Healthcare deals totaled $187.8 billion globally during the first half of 2023, an increase of 43% from a year ago, according to Refinitiv.

Last month, private equity firm TPG agreed to acquire healthcare information technology platform Nextech from Thomas H. Lee Partners for $1.4 billion. Reuters reported on Monday that Waystar, one of NextGen's private equity-owned rivals, is preparing an initial public offering at a valuation of as much as $8 billion.

NextGen's technology platform helps healthcare providers with operations ranging from digitalization of patients' health records to the administration of finances. Roughly 90% of the company's $653.2 million revenue in fiscal year 2023 was recurring.

NextGen shares were down 9% year-to-date prior to news of the company exploring a sale, deeply underperforming a 32% rise in the Nasdaq Composite Index, as some of its clients trim spending on information technology and the company grapples with the fallout of a federal investigation.

The company agreed to pay $31 million last month to settle claims by U.S. prosecutors that it misrepresented the capabilities of its software and paid users kickbacks to get them to recommend it.

(Reporting by David Carnevali in New York; Editing by Bill Berkrot and Jonathan Oatis)