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Marathon and Everside merger happened after a year of talks

The merger of private equity-backed doctor groups Marathon Health and Everside Health, announced on 8 February, came about after a year of talks between the two companies, both of which had “a mutual desire to explore a combination,” according to Marathon CEO Jeff Wells, who is CEO of the combined entity.

Neither company was in a formal auction process, although Marathon explored combinations with other doctor groups and companies in adjacent spaces, said Wells in an interview.

Marathon, which is majority held by General Atlantic, and Everside, which is backed by New Enterprise Associates, Oak HC/FT, and others, didn’t use investment banks to advise on the transaction, Wells said.

The combination of Indianapolis-based Marathon with Denver-based Everside creates a company with more than USD 500m in revenues and 3,000 employees that serves around 2.5m patients in over 640 employer and union-backed health plans, said Wells.

The combined company is focused on “advanced primary care, mental health, occupational health, musculoskeletal care, and pharmacy services through a network of over 680 health centers in 41 US states, according to a press release.

Wells called the deal “a merger of equals” and not a takeover, even though the combined company is named Marathon Health and the CEO of Everside Health, Chris Miller, is departing. Wells said none of the existing private equity shareholders are selling their stakes in the transaction. “Our shareholders are taking a long-term view,” although some with “different time horizons” may exit in the future, he said.

The merger comes amid an active market for doctor group consolidation, both among private equity and strategics, as companies seek to build scale to better compete.

In 2021, Walgreens Boots Allliance [NASDAQ:WBA], for instance, bought a stake in primary care group VillageMD for USD 5.2bn, then subsequently in 2022 purchased doctor group Summit Health with Cigna subsidiary Evernorth, from Warburg Pincus for USD 8.9bn, according to filings. In addition, Amazon.com [NASDAQ:AMZN] in 2022 bought doctor group 1Life Healthcare, aka OneMedical, for around USD 3.9bn in 2023.

Wells said the combination of Marathon and Everside has a “unique strategic rationale,” in that it would boost both company’s operations in the markets where they currently operate. “There is tremendous geographic and density overlap,” he said, giving the combined company “a significantly deeper presence in these markets.”

Wells said he doesn’t anticipate any antitrust issues with the merger given that the combined entity serves 2.5m patients in an employer and union health plan market of around 140m Americans.

The US Federal Trade Commission has lately become more aggressive in challenging healthcare mergers, most notably in 2023 suing Welsh Carson-backed US Anesthesia Partners (USAP) over what it said was a “multi-year anticompetitive scheme” to drive up prices — an accusation that USAP and Welsh Carson denied.

Wells said the company expects to spend a year or so integrating the businesses and is not considering an immediate exit, either through a strategic or private equity sale or through an initial public offering. However, in the future, depending on its growth trajectory and other factors, it could decide on exit strategies, particularly through an IPO, since “access to capital has become very important,” the CEO said.

Paul Weiss provided legal counsel to Marathon and Goodwin Procter provided legal counsel to Everside.