"The first wealth is health."
-Ralph Waldo Emerson
November 03,2014
Aetna to Acquire bswift for $400 million
martinwolf Transaction Analysis
Financial Information
- Enterprise Value: $400 Million
Transaction Facts
- Health insurer Aetna, Inc. (NYSE:AET) announced today that it was acquiring insurance exchange technology company bswift for $400 million.
- Aetna, the US’s third-largest health insurer, is heavily invested in healthcare exchanges – the company currently sells insurance on public exchanges created by the US healthcare reform law in 18 states as well as on various private exchanges.
- This transaction announcement comes just seven months after bswift received a $51 million investment from Great Hill Equity Partners in April, and at the time news articles reported that the Chicago-based company had been growing at more than 40 percent annually for the past four years. Access to significant private equity capital is often a sign for presumptive acquirers that valuations will rise quickly.
Strong Positioning Means High Value Creation
- Success Leads to Flexibility: Since the US healthcare reform law was signed in March 2010, Aetna’s share price has risen almost 140 percent, creating approximately $20 billion of equity value for Aetna shareholders. This transaction amounts to a small fraction of that number and helps secure Aetna’s continued access to the new customers who sign on to the healthcare exchanges each season.
- Preparing for Premium: bswift’s high growth journey began when it was selected in 2009 as the technology provider for Utah’s state health exchange (which, along with that of Massachusetts became the basis of the broader US healthcare reform act). Though bswift ended its role in the marketplace in July 2013, the experience positioned bswift for success once the US healthcare law created exchanges on a nationwide scale.
- Leadership Premium: Like Benefitfocus (Nasdaq:BNFT), bswift is a recognized leader in its space and commands a premium. Benefitfocus, which currently trades at 5.6x revenue, is a relevant comparable and, for Aetna, a warning sign of how high bswift’s valuation may get if Aetna were to wait and try to acquire it later.
- M&A as a Constant: In 2011-12, there was a wave of M&A in the HCM, or human capital management, space (including SS&C’s acquisition of BenefitsXML and Accel-KKR’s investment in Infinisource). Now that the healthcare reform law has been in effect for a full year and isn’t going anywhere, we expect a new wave of M&A as providers adapt to changing demand.
For more information, view the press release by clicking here.
martinwolf was not the advisor in this transaction.
