Tenet ended a four-year Conifer divestiture quest and kept the unit as growth returned
Tenet dropped the Conifer spin-off in March 2022 after COVID delays and improving margins made the revenue-cycle arm worth keeping.
What was changed
Conifer, Tenet Healthcare's revenue-cycle-management arm, had spent more than four years staged for exit. In December 2017, amid plans to drastically cut costs under then-new CEO Ron Rittenmeyer, Tenet announced it was exploring a sale of the unit; UnitedHealth Group was reported among the suitors, but no deal came. In 2019 the plan became a spin-off into a publicly traded company, targeted for completion by the second quarter of 2021 — and then the COVID-19 pandemic delayed it.
By March 2022 the math had changed. Conifer's financial performance and growth expectations had improved, and after a board review conducted with independent legal and financial advisers, Tenet announced it would keep the unit rather than spin it off. 'We've spent a lot of time improving the performance, the results and the margin … to be able to bring these things to market,' CEO Saum Sutaria told investors. Rittenmeyer, now executive chairman, said the drawn-out process was not 'time wasted.'
Analysts read the reversal as discipline rather than indecision. Jefferies' Brian Tanquilut called the move 'reasonable' and 'well-telegraphed', pointing to executives' comments at investor conferences, and said 'Conifer has shown significant operating and financial improvement that will be accretive to [Tenet's] growth going forward.' Tenet said Conifer was expected to generate revenue growth in the mid- to high-single digits, with new client wins and 'compelling growth prospects' in the pipeline.
Why it worked
Four years of staging a unit for sale — auction first, then spin-off — ended because the unit improved enough to keep.
Margin work beat deal-making: better performance and growth expectations flipped Conifer from an exit candidate into a growth engine.
Telegraphing saved credibility: analysts had heard the reversal coming at investor conferences, so retention read as discipline, not dithering.
What can be applied
When a divestiture candidate outperforms, calling the sale off is the move: improving margins can make keeping a unit worth more than any buyer would pay for it.
Aftermath
The announcement closed a process that had run since December 2017. Conifer stayed inside Tenet with mid- to high-single-digit revenue growth expected, new client wins landing and what Tenet called a compelling growth pipeline, backed by the formal board review with independent legal and financial advisers.