UnitedHealth snaps up Advisory Board’s healthcare unit

UnitedHealth Group agreed on Tuesday to acquire Advisory Board Co.'s healthcare analytics, research and consulting operations for about $1.3 billion including debt.

The merger is part of a two-way deal that will also see private equity firm Vista Equity Partners purchase Advisory Board's education arm for $1.55 billion. It's another win for Elliott Management Corp., which disclosed a stake in Advisory Board earlier this year and sought talks on strategic options.

The healthcare component of this sale is relatively small for UnitedHealth, which has a market value of $190 billion. But the purchase fits with the company's M&A modus operandi, which is buy and diversify. UnitedHealth has now accounted for more than 70 percent of the deals successfully undertaken by North American managed-care providers in the past five years. That's at least $26 billion in spending, nearly all of it for targets that fall outside of its core managed-care business.

Advisory Board will become a part of UnitedHealth's Optum pharmacy-benefit and healthcare services unit. That business has been a major source of revenue growth for UnitedHealth at a time when sales are sputtering for many of its peers. Adding Advisory Board's businesses, particularly its underutilized research operations, should provide another boost.

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