'Order the New Mountain special': How one private equity firm is bringing big exits back to healthcare VC

• New Mountain Capital is making big bets in healthtech, and VCs are loving it.
• The firm has eschewed private equity's typical clinic rollups to buy up healthcare AI startups.
• Healthcare VCs desperate for exits have a new appealing option: "Order the New Mountain special."

Private equity, and its slash-and-burn routine, doesn't always play nice with healthcare companies. $55 billion New Mountain Capital wants to win big in healthtech with a different playbook.

In May, New Mountain announced the creation of Smarter Technologies, an audacious healthcare AI rollup. The company combines legacy player Access Healthcare, which New Mountain acquired in January, with its newly acquired venture-backed startups SmarterDx and Thoughtful AI to go after hospital revenue management.

It's the latest in a string of aggressive healthcare bets spearheaded by Matthew Holt, New Mountain managing director and president of private equity, who's been a fixture at the firm for 23 years. He's taking hints from venture capital for an approach to healthcare PE that prioritizes growth and tech innovation, and VCs are loving it.

"They're great deals for investors," said a healthcare banker who asked to remain anonymous because they weren't authorized to speak to the media. "If your company can't get to an IPO, order the New Mountain special."

To date, healthcare PE has largely been marked by firms buying and combining in-person physician practices, everything from hospitals to dentists' offices to medspas. Holt has eschewed physician group rollups to dig deep into healthtech instead, with numerous megadeals behind his thesis, from New Mountain's $7 billion merger of Datavant and Ciox Health in 2021 to its $5 billion healthcare payments rollup of Machinify, The Rawlings Group, Apixio, and Varis in January.

And Holt isn't afraid to pay up for a fast-growing asset. For its Smarter Technologies rollup, New Mountain paid around $1 billion in cash and stock just to acquire SmarterDx, multiple people with knowledge of the deal told BI.

It's been a rough few years for healthcare private markets, with only a handful of IPOs and few acquisitions, as public healthcare companies tumble and buyers in Big Tech and health insurance take a step back from healthtech M&A.

That's made liquidity especially hard to come by for healthcare investors, and all the more surprising that New Mountain is leaning in where many other buyers are leaning out. New Mountain Capital is offering an exit ramp that VCs are craving, with a favorable return on their investment and the assurance that Holt won't submit companies to private equity's profit-at-all-costs mentality.

"Matt is taking very bold bets around great people. I think the whole sector has perked up because of that," said Michael Greeley, cofounder and general partner at Flare Capital Partners and an investor in SmarterDx, as well as Aetion, another healthtech startup that New Mountain's Datavant acquired in April. "How he approached those deals and valued them, it was very affirming for a lot of us to see those transactions."

Holt is undeterred by the volatility. Despite announcing several large healthtech deals already this year, he told Business Insider he has no plans to slow down.

"We're at a breaking point in the US healthcare system with the costs and the unhappiness of its constituents," he said. "The time is now for further investment."

Private equity meets venture studio

Multiple investors and bankers told BI that New Mountain's healthcare returns are impressive. While those returns aren't public, Holt has led some of the biggest healthcare deals of the last few years.

Signify Health, created inside New Mountain in 2017, saw one such blockbuster deal; the home healthtech company went public in 2021 and was acquired in 2023 by CVS Health for $8 billion. In the biopharma and medtech category, New Mountain sold manufacturing company ILC Dover to Ingersoll Rand in 2024 for $2.3 billion. A few years back, in 2019, the firm saw its life sciences tools company Avantor go public at over a $14 billion valuation, and sold health payments company Equian to UnitedHealth Group's Optum for $3.2 billion the same year.

Those returns have given Holt further license to deviate from PE tradition. By his own admission, he's adopted a model for building companies that's part PE, part venture studio.

"We identify a problem statement in the industry, and then we put a blueprint together of what would be the company that we would build to best go after that problem," he said. "So what we're really doing is we're taking a page out of the venture studio playbook and applying the same process, but with the advantage of starting with a large-scale private equity fund."

Like many private equity firms, New Mountain uses its funds to buy or build a stable underlying business and then acquire additional companies to achieve scale. Unlike most private equity funds, profitability isn't the main focus of getting that scale, at least not at first.

"Aggregating different pieces like they've done with [Smarter Technologies] isn't unusual. Private equity rollups are the first 10 pages of the playbook," said Bryan Roberts, a partner at Venrock. "Applying technology and data, and going for growth rather than just EBITDA, is the interesting twist."

That twist has led Holt to buy several younger, venture-backed startups, a rare feat for PE, since venture-backed startups often focus more on achieving blockbuster growth than profitability. SmarterDx last raised a $50 million Series B funding round in May 2024, while Thoughtful AI last raised a $20 million Series A in July.

While PE deals often take the form of leveraged buyouts, wherein a firm invests borrowed money with the company's assets as collateral, New Mountain can't and doesn't fund those startup deals with debt, since startups don't usually have the stable cash flows or other assets to derisk the loans. In fact, the LBO-light approach is part of New Mountain's strategy in every sector, not just healthcare — New Mountain's website says the firm "emphasizes business building and growth, rather than debt, as it pursues long-term capital appreciation."

The performance of New Mountain's previous healthcare bets has also given the firm freedom to hold onto assets past when they'd generally be expected to generate a return, usually within a ten-year period. Holt said he's rolled several of New Mountain's largest healthcare investments, including Datavant, Swoop, and Real Chemistry, into continuation funds to allow them to continue growing without strict time constraints.

Those returns may be around the corner, though, as at least one of New Mountain's portfolio companies looks to be preparing for an IPO. Datavant CEO Kyle Armbrester told BI in January that he expected to make multiple healthcare acquisitions this year, rounding out the company with more features and revenue in a strategy that could make it more attractive for a public market debut.

"We're certainly at a size and scale where going public could be something that we contemplate," Armbrester said at the time.

Healthcare PE's rocky reputation

In the Venn diagram of private equity and venture capital, more firms on both sides are making bets in the center.

VC firms, including General Catalyst and Thrive Capital, are buying up accounting firms and other businesses in PE-like rollups that rely on AI to make the combined companies more efficient. And, as venture-backed startups desperate for an exit face a volatile IPO market and antitrust concerns from Big Tech buyers, PE firms from KKR to Thoma Bravo are scooping them up.

In healthcare, most PE investment still goes toward care delivery companies. But New Mountain isn't the only PE firm interested in new health technologies. TowerBrook Capital and CD&R bought AI-powered revenue cycle management company R1 RCM last year for $8.9 billion. In March, Clearlake Capital bought a majority stake in ModMed, an electronic health records and health AI software maker, in a deal valuing the company at $5.3 billion.

Private equity's rising interest in healthtech means more competition for New Mountain and Holt. New Mountain bid on then-public R1 RCM itself in early 2024, before TowerBrook and CD&R's buyout. The firm took a 32% stake in R1 RCM in 2022 after investing $400 million in revenue cycle tech company CloudMed and selling it to R1 RCM for $4.1 billion.

Holt said the firm sold its full stake in R1 RCM as part of the buyout at a "significant premium." Then, New Mountain bought Access Technologies, along with SmarterDx and Thoughtful AI, to build its own competitor.

Still, private equity's rocky track record in healthcare looms. The industry has frequently faced criticisms that its cost-cutting priorities, when applied to healthcare, can put patient health at risk. Steward Health Care even drew a congressional inquiry into its operations last year after the hospital system formerly owned by a PE firm declared bankruptcy last year.

And return potentials in healthtech VC don't look as attractive as they did in 2021 at digital health's fundraising peak. The first digital health company to IPO this year, Hinge Health, went public at a $2.6 billion valuation after last being privately valued at $6.2 billion in 2021. The second, Omada Health, went public at a $1.1 billion valuation, roughly flat with its last private valuation of over $1 billion, notched in 2022.

Holt said New Mountain's ability to combine PE and VC sensibilities, its focus on technology, and its close collaboration with founders have helped the firm gain ground in healthcare, where other investors have misstepped.

"There are a number of PE firms that don't really know how to maintain a growth-oriented culture with a founder-led business," Holt said. "We make a point to treat everyone well and execute what we say we're going to execute."

Holt estimates he's built close relationships with 50-plus healthcare founders and executives, a talent bench he's repeatedly drawn on when launching new ventures. Datavant's Armbrester, who Holt previously brought on as the CEO of Signify Health, said Holt has notched partnerships, co-invested with, or forged relationships with every major health insurer, hospital system, and pharma company. He doesn't cold-call founders; he already knows them.

"I don't think the guy has ever had a meal alone," Armbrester said.

And New Mountain sees so much opportunity in new healthcare AI applications, like using AI to manage hospital billing and claims, that it's less concerned with the recent exit drought, said Jeremy Delinsky, the new CEO of Smarter Technologies.

"If you're working in a very narrow use case where the return on investment isn't as clear cut, you're worried about, are you buying an asset at the point where it's worth the most?" Delinsky said. "But [revenue cycle] might be one of the single biggest and best business opportunities in America, given how much money is spent on it and how little innovation has occurred. The numbers are just so big that it allows for the ability to survive making mistakes."