AMERICAN MEDICAL RESPONSE, INC.
INDUSTRY: Healthcare Services
INVESTMENT THESIS: Consolidation of a Fragmented Industry
ROLE: Co-Founder and Director
Investment Highlights:
Through acquisition and consolidation of a fragmented industry, American Medical Response (“AMR”) grew to become the largest ambulance service firm in the world, employing over 12,000 people in 29 states only four years after its inception. The AMR concept of combining companies allowed the sellers of ambulance service firms to realize a far higher value for their companies than any other alternative, while at the same time building a highly successful company that provided major returns to its institutional shareholders.
In partnership with the other founders, Mr.McGrath developed and executed a novel initial financing strategy: simultaneously acquire four large operating companies and conduct an Initial Public Offering on the New York Stock Exchange at the same time (Mr. Chang played an important role as one of the initial investment bankers in the IPO).
Mr. McGrath also helped develop its acquisition program, which added over seventy-five additional companies to the AMR fold; since nearly every acquisition brought immediate day-one synergies and cost savings, AMR's gross operating margins significantly improved. He had direct responsibility for handling the "Wall Street end", helping to bring in over 40 institutional investors, eight analyst "buy" recommendations, and manage three additional public stock offerings, the last one managed by Goldman Sachs. The stock price rose from its initial $8.50 per share to $40.00 at the time of its ultimate sale to Laidlaw Industries.
This novel financing strategy uniquely addressed the financial needs of the owners of its initial operating companies. It provided them with an exit that offered a mix of stock and cash that could be customized for each individual seller to best meet their divergent family needs, such as allowing for intergenerational tax skipping, providing other estate planning benefits, and cashing out non-active minority owners. At the time of its IPO, the "face value" offered the initial owner operators was nearly twice what they could have realized with any private equity or similar solution; and their total realized value averaged many times that number. This creative and unique solution met the complex financial and personal needs of the sellers that could not be matched by traditional "off-the-shelf" methods.
FINANCIAL RESULTS: IPO investor value rose nearly 5X in four years
 |
||
 |
 |
 |
  |
||