Bernstein On Advisory Board Health Care Services Unit Purchase By UnitedHealth

UnitedHealth Group Inc UNH may be on the brink of acquiring health care and education consulting firm The Advisory Board Company ABCO, a move that could give UnitedHealth a major leg up on the competition.

Reports have surfaced that UnitedHealth is working with private equity firm Vista Equity Partners and is close to closing a deal for Advisory Board. The reports suggest that UnitedHealth would acquire the health care segment of advisory board, with Vista taking over the education unit.

In a new note on Monday, Bernstein analyst Lance Wilkes said the move could signal a major strategy shift for United. Instead of serving strictly as a managed care organization, United may now be pivoting more into health care services, Wilkes said.

“We believe UNH is already ahead of other MCOs because they have two ways to win, partnering with providers and acquiring care delivery,” Wilkes wrote. “This acquisition gives [United] a third way to win, as a service provider to providers.”

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While the acquisition could open a door for the health care giant, Wilkes said it likely won’t move the needle much for investors in the near term due to Advisory Board’s relatively modest revenue.

The deal might have an even larger impact on Evolent Health Inc EVH, which was founded in part by Advisory Board. Reports of the UnitedHealth buyout gave no indication of what the company would do with Advisory Board’s remaining 25 percent stake in Evolent.

United remains one of Bernstein’s top picks in the health care services space. Bernstein maintains an Outperform rating on UnitedHealth and has a $190 price target for the stock.