Trover Sale Generates 4.2X Return for Tailwind

By Luisa Beltran - pehub.com - January 07, 2011

The New Year seems bright for Tailwind Capital, which recently completed the sale of Trover Solutions and acquired two other companies.

In late December 2010, Tailwind sold Trover to ABRY Partners. Tailwind, a New York PE firm, received $60 million at the close, according to a Jan. 7 letter to LPs obtained by peHUB. Tailwind expects to receive another $7 million in future escrow distributions, the letter said. Tailwind has also realized $45 million in dividends from Trover via debt recaps in 2005 and 2007.

The sale of Trover, which provides insurance subrogation services, generated a 4.2x return for Tailwind and an IRR of 50%. Tailwind received about $112 million in proceeds, including dividends, the document said.

“Our long standing partnership with the Trover management team succeeded on all three levels,” says Doug Karp, Tailwind’s co-CEO and managing partner. “The company grew its business and expanded into new lines. It generated exceptional returns for investors, management and employees. And, it provided exceptional services to its customers.”

Louisville, Ky.-based Trover represents health insurance companies and recovers accident-related medical benefits for clients on behalf of their insureds. Basically, Trover helps insurance firms get reimbursed for costs if a third party is responsible, a source says. The company has over 650 employees.

Trover has had an energized history since its founding in 1988 as a Warburg Pincus portfolio company. In 1995, the company was sold to Medaphis, a Welsh Carson portfolio company. Trover was then spun off from Medaphis in 1997 via an IPO.

Trover’s fortunes declined in 2003 when it lost its largest customer and the company’s market cap dropped significantly, the letter said. One year later, in 2004, Tailwind injected $27 million in Trover for an 88% stake, the letter said. Under Tailwind, Trover’s EBITDA grew from $10 million to about $21 million. Trover was sold on Dec. 28 to ABRY.

The month of December saw two other deals for Tailwind. The PE firm acquired the Federal business of Ericcson. The unit, located in Reston, Va., was renamed Oceus Networks; it provides broadband services to governments. Tailwind also bought Apex Companies, a water resources and environmental services firm located in Rockville, Md. Financial terms were not disclosed for either deal.

For the sale of Trover, Tailwind received financial advice from Dirk Leasure, Brett Skolnik, Michael Neuburger of BMO Capital Markets and William Blair’s John Kibler and Karl Palat