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Parthenon-backed Performant outlines share sale

by Taina Rosa | Published July 30, 2012 at 3:59 PM

Parthenon Capital Partners-backed Performant Financial Corp. plans to raise up to $161 million in an initial public offering of 11.5 million shares at a price range of $12 to $14.

Livermore, Calif.-based Performant, founded in 1976, helps private companies and government agencies recover delinquent and defaulted loans. In the year ended December 2011, the company posted Ebitda of $57.8 million on revenue of $163 million. The previous year, the company reported Ebitda of $41.5 million on revenue of $109.8 million.

In the IPO, Parthenon is selling almost 8 million shares, reducing its stake in Performant to 60.6% from 81.7%, according to the company's prospectus. At the midpoint price of $13, the private equity firm would raise $103.8 million and its remaining stake of about 27.4 million shares would be worth $355.7 million.

Parthenon acquired Performant, then known as Diversified Collection Services Inc., in January 2004 via a $167 million recapitalization.

Allied Capital, a Washington investment group, provided $26 million in mezzanine financing and $2 million of convertible preferred stock, while Chicago-based Madison Capital Funding LLC supplied senior debt to the deal. It is not known how much equity Parthenon used in the transaction.

Proceeds from the 2004 recapitalization were used to buy out some shareholders, as well as provide additional growth capital. Previous private equity investors in the company, ABS Capital Partners and TA Associates, which together invested $35 million in the company in 1996, had sold their stock back to Diversified Collection Services over the previous three years.

If the shares price at $13 per share, the company's enterprise value, including $33.4 million in debt, would be $713.4 million, equal to 11.7 times trailing adjusted 2012 Ebitda.

Proceeds of the IPO will go to pay a $1.3 million fee with respect to the termination of the company's advisory agreement with an affiliate of Parthenon Capital. They will also be used for working capital and general corporate purposes and for potential strategic alliances or acquisitions, the company said in the prospectus. The company, which expects to raise $21.5 million based on the $13 per share price from the sale of its own shares, will not receive proceeds from the sale of Parthenon's shares.

Morgan Stanley, Goldman, Sachs & Co., Credit Suisse Group and Wells Fargo Securities LLC are joint bookrunners on the deal.

The company plans to list on the Nasdaq Global Market under the symbol PFMT.

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