PE Deals of the Year
PAI Partners: Yoplait   Onex: Emergency Medical Services   Apollo: Hughes Communications   Silver Lake: Skype   El Paso   Castle-Harlan: Perkins & Marie Callender's   Midocean: Sbarro   Sun Capital: Friendly Ice Cream   Blackstone et al.: Travelport   Bain: Keystone Automotive  The year in PE bankruptcies  Other notable PE exits

Few private equity-backed businesses emerged unscathed from the financial crisis of 2008. Emergency Medical Services Corp., a provider of first responder and physician outsourcing services, was among the notable exceptions. In 2008 revenue grew by $183 million. Nearly half of that was attributable to its work for the Federal Emergency Management Agency in the aftermath of hurricanes Gustav and Ike.

"It had nothing to do with luck," says Robert M. Le Blanc, a managing director of Toronto private equity firm Onex Corp. Says Le Blanc, who spearheaded the Greenwood Village, Colo., company's creation in February 2005, EMS had both the market position and the skills to assist the federal agency in ensuring there is no repeat of the widely criticized government response in dealing with the catastrophic effects of Hurricane Katrina in 2005.

Onex amalgamated ambulance provider American Medical Response Inc. and staffing company EmCare Inc. It invested about $214 million of equity for a 97% stake in the $818 million carve-out from Laidlaw International Inc.

Despite operating in segments vulnerable to uncertainty over government reimbursements, both businesses maintained dominant market shares. That allowed an Onex-led investor group to reap a 7.7 times net return on cost -- among the year's best exits. All told, investors reaped a 46% internal rate of return.

Among other plans, Le Blanc envisioned expanding EmCare's physician staffing model beyond the emergency room into other areas such as radiology, teleradiology and surgery units. The company recruited doctors known as hospitalists to manage patient care. The unit now accounts for 60% of total net revenue.

The idea, says CEO William A. Sanger, who joined in 2005, is to better manage patient care, avoiding "episodic care," where different physicians see a patient with little coordination, to reduce costs.

American Medical, founded in 1992 to consolidate ambulance companies, has made more than 200 acquisitions since inception. Now one of the few large providers in a fragmented sector, it contributes 40% of revenue.

Sanger says EMS is the only private exclusive contractor with FEMA, which picked EMS in 2007 after it recommended a more unified approach to government response to emergencies.

During Onex's ownership, Ebitda grew from $132 million in 2005 to $322 million in 2010, or a compounded 16% annual rate. Revenue also went from $1.6 billion in 2005 to $2.8 billion in 2010.

Less than a year after the buyout, Onex took EMS public at $14 a share, more than double the $6.67 per share purchase price in December 2005. By the time Clayton, Dubilier & Rice LLC purchased it in March 2011, the value had soared to $64 a share, or $3.2 billion.

Net debt was only $85 million, while cash was $335 million, says Le Blanc, who credits CEO Sanger for shrewd stewardship of the business.

Which goes to show that private equity, together with some very good management, can create value without too much leverage.