Finance & Acquisitions: CNSI

Dec 2, 2021 - Health

Scoop: Carlyle to buy health IT company CNSI

Sarah Pringle

Illustration: Aïda Amer/Axios

The Carlyle Group tells Axios that it has agreed to buy CNSI, a Virginia-based manager of IT systems for state and federal agencies, from Alvarez & Marsal Capital Partners.

Why it matters: This is about modernizing how Medicaid agencies process medical claims and manage provider enrollment, while responding more efficiently to legislative and regulatory changes.

Most of what CNSI does today involves the Medicaid Management Information Systems (MMIS) market, where it provides the information systems that states use to administer their Medicaid programs. CNSI also has programs with the VA, CMS and Labor Department.

• What has been a "slow to evolve" industry presents a big growth opportunity for CNSI, says Carlyle managing director Dayne Baird. “These are generally very large monolithic systems that were put in place 25 or 30 years ago on legacy mainframe technology, and as you’d expect, those systems are increasingly costly to maintain.”
• Not surprisingly, Carlyle's internal deal team was a combination of its government services, tech and health sector groups.

By the numbers:CNSI generates around $200 million of revenue. The acquisition's price was not disclosed.

• The largest industry player in the state MMIS market is Gainwell, which was formed in 2020 when Veritas Capital bought a unit of DXC Technology for $5 billion. Conduent is another major participant. But with up to 20 states rebidding their contracts in the next few years, CNSI will look to take share, Baird tells Axios.

Of note: Carlyle has a longstanding relationship with CNSI's CEO Todd Stottlemyer, who will continue to lead the company. Stottlemyer first partnered with the buyout shop in the 1990s as a senior executive at then portfolio company BDM International. Baird calls it a “long overdue reunion.”