In short: New special-situation long — a company exploring a sale, bought after the rumour pop faded. "Shares of Waystar were up 12% in early hours on Tuesday. We waited for them to sell off a little bit, to up 6-7%, we added a position. We still have room to add more to the position in the 25s as we think the potential takeout could be in the 35 range… almost 40% upside." The setup: a Reuters report that it hired bankers — "Evercore, which is one of the best boutique M&A banks… Barclays is also advising" — with EQT (13%), CPPIB (10%) and Bain as legacy holders. The valuation: "trading at… around 10-11 times forward EBITDA and if it were to sell itself, it would probably sell… in the 13-14 times EBITDA range" on $535-545M of adjusted EBITDA (a 42% margin), ~$300M of unlevered FCF, ~$1.3bn net debt. The cases: "a private equity firm… about 14 times EBITDA… about $31 a share… a strategic… around 16 times… about $37… the high synergy bull case… around $40… My base case is between the sponsor LBO floor and the strategic M&A… low 30s to mid-30s." The moat: "Healthcare providers cannot operate without receiving payment," integrated into Epic, Cerner and Athenahealth, net revenue retention over 100%, and "an essential software business that in my opinion cannot be fully disintermediated by AI because healthcare is quite regulated." The buyers: "the most obvious buyers could be Optum… CVS Health… or Veritas or Thoma Bravo, those four"; Oracle "a low probability because it's having its own problems."
Waystar runs software that gets doctors and hospitals paid. American medical billing is a maze of insurance rules and thousands of billing codes; Waystar checks a patient's coverage before treatment, cleans up claims before they are sent, fights rejected claims afterwards, and handles the patient's share of the bill. Hospitals cannot function without getting paid, the software is wired into their core record systems, and switching providers is risky — so customers rarely leave, and they tend to spend more each year.
Reuters reported that Waystar has hired investment banks to explore selling itself. The shares jumped 12%, then faded; Singh bought after the fade, at around $25-26. His arithmetic: the business earns about $540 million a year before interest, tax and depreciation, at a very high 42% margin, and trades at roughly 10-11 times that. Private-equity buyers typically pay about 14 times for software like this — about $31 a share — because the steady cash lets them borrow heavily and pay the debt down. A healthcare company that could cut duplicate costs might pay around $37-42.
His base case is somewhere in the low-to-mid $30s. The most likely buyers, in his view, are UnitedHealth's Optum, CVS Health, or buyout firms Veritas and Thoma Bravo. The risk is simple: sale talks are early and could end with no deal, in which case the rumour premium would fade.
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