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KKR-backed healthcare data company Cotiviti is close to securing a deal to buy smaller rival Edifecs for just over $3bn after it opted against accepting a higher bid from UnitedHealth Group out of fear that regulators could block a takeover, according to people familiar with the matter.
Healthcare group UnitedHealth made an informal offer of about $3.5bn for Edifecs but it was likely to be rejected in favour of the lower bid from Cotiviti, which valued the healthcare data company at $3.05bn, four people said.
Edifecs’ owners favour the offer from Cotiviti because of fewer antitrust concerns associated with the buyer, compared with $500bn US healthcare giant UnitedHealth, and because the bidder was willing to move quicker, two of the people explained.
Deliberations are continuing but a deal is close to being finalised, the people said, but they cautioned that timelines could slip, UnitedHealth could return to the negotiating table or the deal could fall apart, they added.
Edifecs offers software products that streamline the sharing of administrative and clinical data between all parts of the US healthcare sector, including payers, hospitals, employers and government health agencies. Cotiviti, a $11bn health software company, is part-owned by KKR and Veritas, another private equity group.
If a deal gets over the line, the buyout will still mark a profitable exit for Edifecs’ private equity owners TA Associates and Francisco Partners, which jointly bought a 51 per cent stake in the company in 2020, valuing the business at $1.4bn. Healthcare investor UPMC Enterprises is also a part-owner of Edifecs.
The decision to opt for a lower offer to reduce the possibility of a deal being delayed or blocked by a lawsuit brought by US antitrust authorities underlines how competition issues could continue to be a thorn in the side of the US’s biggest companies even under President Donald Trump’s administration.
Due to its dominant position across every part of the US healthcare sector, UnitedHealth, which generates almost $300bn a year in revenues, has often drawn the attention of antitrust regulators. In the last few months of Joe Biden’s administration, the Department of Justice sued to block UnitedHealth’s $3.3bn takeover of home health and hospice provider Amedisys.
UnitedHealth is also facing a broader justice department antitrust probe, and its pharmacy benefit manager subsidiary OptumRx was targeted by Lina Khan’s Federal Trade Commission in another lawsuit.
Edifecs, KKR and TA Associates declined to comment. Cotiviti, UnitedHealth, Veritas and Francisco Partners did not respond to requests for comment.
Dealmakers had hoped that new antitrust enforcers appointed by Trump would create an easier environment for companies looking to do deals. Biden’s administration took a particularly aggressive approach on antitrust rules for large technology and healthcare companies.
