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News

Change Healthcare sale rewards shareholders

Andrew Bouldin

Investor Vic Gatto, Owen Alum,  has a reason to celebrate this week. His firm, Solidus, was a lead investor in Change Healthcare that sold for as much as $185 million

to Nashville health payment company Emdeon.

Gatto has had a number of investment successes over the years and the deal was his biggest by far, he said.

But the sale is also among the largest to date for the state's TNInvestco program. The more than $2 million Solidus invested through its TNInvestco fund multiplied to close to $7 million through the sale, returns that will be split between Solidus and the state, which means taxpayers are rewarded as well.

TNInvestco, now in its fifth year, was created to support early stage companies as a means of job creation at a time when the economy was shrinking and capital was difficult to come by.

Given that Change Healthcare has been successful in raising capital from top national firms, it's likely the company would have found investment without public funds. Still, its CEO Doug Ghertner and founder Christopher Parks have said the investment helped the company grow more quickly and reach a level where it could attract larger investors. TNInvestco's goal is to contribute to job growth, and ideally, make a return, so this deal marks a big win for the program.

At least five TNInvestco companies have been bought by other companies since the program was created in 2009, including NeighborMD in Nashville, sold to HCA's TriStar Health System and CareSpot in 2013, and Memphis-based ExtraOrtho, sold to Zimmer Holdings Inc. in 2011.

Since launching in 2007, Change Healthcare has grown to more than 80 employees. The sale to Emdeon means further growth and, as a result, more jobs for both Change Healthcare and for Emdeon, as well as another good story coming from Nashville's startup community.

"Nashville is becoming a really strong engine of health care IT and health care innovation, and TNInvestco helped spawn that over the past five years," Gatto said. "TNInvestco helped light a match that has created an ecosystem."

ChangeHealthcare raised close to $35 million in outside capital from a group of firms that includes Solidus, Mitsui Global Investment, Sandbox Industries, HLM Venture Partners, West Health Investment Fund and Noro-Moseley Partners. Solidus's four funds invested a combined $8.5 million in Change Healthcare, which means Solidus did very well. And, to a lesser extent, so did the taxpayers.