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Premier Inc, a healthcare group purchasing and technology company, has recently become the subject of acquisition interest from private equity firm Patient Square Capital. Founded by former KKR executive Jim Momtazee, Patient Square is exploring a potential deal to take Premier private, according to reports. Discussions are still at an early stage with no certainty that a transaction will occur, but financing efforts are underway. The market has responded to the news with optimism, with Premier’s stock climbing 22% year-to-date, giving it a market cap of approximately $2.13 billion. The interest comes as Premier closes out fiscal year 2025 with stronger-than-expected performance, notably within its Supply Chain Services segment and newly invigorated advisory business. Despite macroeconomic pressures facing health systems, Premier’s core value proposition—delivering cost efficiency through group purchasing and operational transformation—has become more relevant than ever. Below are the four key reasons why Patient Square may see a compelling case for acquisition and long-term synergy with Premier.
Premier’s Supply Chain Platform Offers Scalable Margin Expansion Opportunities
Premier Inc.’s core business revolves around group purchasing organization (GPO) services that help hospitals and healthcare providers pool their purchasing power to negotiate better prices on medical supplies. This model remains not only resilient but increasingly vital as health systems across the U.S. face financial strain from reimbursement pressures, labor costs, and looming tariff concerns. In fiscal 2025, Premier’s Supply Chain Services segment outperformed expectations, with gross administrative fees growing over 3% and significant contributions from food, pharmacy, and MedSurg portfolios. These categories have proven to be not only profitable but also gateways to broader member engagement. Furthermore, Premier’s GPO contracts are “firm for term,” shielding them from immediate supplier cost increases due to tariffs and providing reliable cash flows. Its digital supply chain and co-management businesses also posted double-digit growth, validating their scalability. For Patient Square, a healthcare-focused investment firm, Premier’s GPO structure offers both immediate EBITDA accretion and long-term margin expansion through contract optimization and digital transformation. With many GPO contracts already renewed and fee-share stabilization expected in the high 60% range by FY2026-end, the visibility into cash flows makes Premier a less risky acquisition, well-aligned with Patient Square’s focus on healthcare platform plays. Additionally, the $100 million annual cash flow benefit from the termination of the tax receivable agreement beginning FY2026 enhances Premier’s free cash flow conversion, further sweetening the deal from a returns standpoint.
High-Margin Advisory Business Signals Transformational Potential
Premier’s Performance Services segment, particularly its advisory business, is undergoing a turnaround that could be highly attractive to Patient Square. With health systems under acute operational and financial pressures, demand for value-based transformation and enterprise-wide advisory services is growing. Premier has capitalized on this trend by bringing in experienced leadership, most notably Dave Zito, to rebuild the advisory unit. In fiscal 2025, the company signed four large multi-year advisory contracts, and for FY2026, management is guiding for advisory revenue growth of over 25%, bringing the segment to an estimated size of $50–$100 million. Importantly, these deals are not short-term wins but long-duration engagements aimed at cost containment, revenue optimization, and supply chain redesign—areas that synergize well with Patient Square’s operational improvement expertise. Advisory revenue is recognized on a milestone basis, with more significant contributions expected in the second half of FY2026 and a full ramp by FY2027. From a buyout perspective, this creates a clear path for margin expansion and revenue visibility. Moreover, integrating Premier’s advisory services with Patient Square’s existing portfolio companies could yield cross-sell opportunities and performance enhancements. The credibility Premier holds as a “trusted brand” in healthcare transformation adds intangible strategic value that goes beyond financial metrics. The advisory pipeline is also described as “robust,” and successful execution on these contracts could turn this segment into a mid-sized, high-margin growth engine—precisely the kind of asset Patient Square targets in its platform investments.
Strategic Acquisition Of Illumicare Enhances Tech Capabilities
In June 2025, Premier acquired IllumiCare, a real-time clinical and financial decision support solution. The asset is a strategic bolt-on that complements Premier’s existing Stanson Health offering and positions the company more squarely in the healthcare technology space. IllumiCare delivers real-time cost transparency and clinical insights at the point of care, driving approximately $100 in savings per inpatient discharge and offering a 10:1 ROI to clients. From a private equity standpoint, the platform offers three attractive features: integration readiness, demonstrated ROI, and scalability. The acquisition is currently breakeven from a profitability perspective but is expected to generate double-digit top-line growth as it is embedded across Premier’s large health system network. Patient Square has previously demonstrated interest in tech-enabled healthcare services with its acquisition of Syneos Health and Patterson Companies. The combination of IllumiCare and Stanson Health gives Premier a unique AI-enabled, EMR-agnostic toolset capable of addressing major cost levers in healthcare operations—namely labor optimization, utilization management, and clinical documentation. For Patient Square, this opens the door to not only enhanced data monetization but also synergistic value creation across other portfolio companies. The tech platform’s alignment with national priorities—such as prior authorization automation and care quality improvement—further reinforces its relevance. While the IllumiCare acquisition is still in early stages of integration, it serves as a signal of Premier’s broader pivot toward tech-enabled services, which may be a significant draw for a strategic acquirer like Patient Square looking to assemble a vertically integrated healthcare platform.
Stabilized Financial Outlook & Balance Sheet Flexibility Post-Tax Agreement Termination
Premier’s financial profile has significantly de-risked heading into fiscal 2026 and beyond. The company ended FY2025 with $84 million in cash and a $280 million credit facility balance. Free cash flow for the year totaled $181 million, translating to a 69% conversion rate, and management expects that number to improve to 70–80% in FY2026. Importantly, Premier made its final $100 million payment tied to a tax receivable agreement (TRA) from the 2020 restructure, which had been a material drag on cash flow. With these obligations behind it, Premier’s balance sheet now offers more flexibility for reinvestment and strategic initiatives. Capital return has also been robust: $800 million in share repurchases under a $1 billion program and $77 million in dividend payouts in FY2025, representing a 4% yield. While FY2026 is expected to be a “stabilization and transition” year due to the tail end of GPO contract renewals and ramp-up costs for new advisory engagements, management expects growth across net revenue, adjusted EBITDA, and EPS to resume in FY2027. The ability to self-fund strategic initiatives without further leveraging the balance sheet is a key attraction for any private equity buyer. Premier’s operational cash flow strength, combined with its disciplined capital deployment strategy, provides the financial runway necessary for platform-level transformation—something Patient Square could operationalize. Moreover, the company’s free cash flow yield (NTM) stands at 5.4%, and its dividend yield at 3.7%, indicating that while growth is moderate, cash returns are healthy—a profile that fits well within Patient Square’s healthcare-focused LBO framework.
Key Takeaways
Premier Inc. presents a blend of stable, high-margin cash flows through its GPO business and scalable growth optionality via its advisory and technology segments. Patient Square Capital’s acquisition interest likely stems from these complementary dynamics. The advisory business’s 25%+ expected growth in FY2026, the recent acquisition of IllumiCare, and the diminishing impact of the tax receivable agreement provide a clearer path to EBITDA expansion. However, risks remain. FY2026 is projected to be a transitional year, with compressed margins in Supply Chain Services and front-loaded costs in Performance Services. On the valuation front, Premier is currently trading at elevated levels relative to its historical norms. As of September 5, 2025, its LTM EV/EBITDA stands at 8.18x and LTM EV/EBIT at 13.94x, with a trailing P/E of 38.01x. These multiples suggest a rich valuation, particularly when compared to its pre-rally levels in early FY2025. Whether Patient Square ultimately proceeds with the acquisition will depend on its assessment of Premier’s ability to deliver on its growth guidance and capture further operational leverage from recent strategic investments.
