IVCA Feature: 2018 Private Equity Portfolio Company of the Year is The Stepping Stones Group

November 7, 2018

The 2018 Illinois Venture Capital Association Awards Dinner is fast approaching – December 3rd at the Four Seasons Hotel – and the honorees have been named. The Private Equity Portfolio Company of the Year is The Stepping Stones Group, a committed family of healthcare brands that focuses on the school therapy market like special needs and autism, with a group of five distinctive businesses under holding structure of The Stepping Stones Group (SSG). 
In this special profile, the IVCA reached out to both the investor firm, Shore Capital Partners – who sold SGG last year – and The Stepping Stones Group itself, through two of their leaders.
Firm: Shore Capital Partners
Representative: Justin Ishbia, Managing Partner
2018 PE Portfolio Company of the Year: The Stepping Stones Group
Representative: Anthony Rintala, President & CEO
IVCA: What are the origins of The Stepping Stones Group? How did it come together to provide the specific group of organizations to impact behavioral health services to children with, for example, special needs and autism?
The Stepping Stones Group (SSG): I got to know the Shore Capital team around 2012-2013 and we began looking at investment themes in various sectors across healthcare services, behavioral health, autism and healthcare staffing. At the time, I was a Senior Vice President at Jackson Therapy Partners in Orlando, Florida. Jackson Healthcare is one of the largest staffing companies focused on the physician, nurse and therapy markets. I was intrigued with the opportunity to work with private equity but when I was initially getting to know Shore Capital, I wasn’t sure that it would turn into a career opportunity.
Through our review of various sectors, we found a group of operating companies focused on placing behavioral therapists on long-term contracts into public schools. Most of the companies were focused on working with speech language pathologists (SLPs), occupational therapists (OTs), and physical therapists (PTs). It occurred to us that this was an underserved market that had great growth potential given the trends in behavioral health and autism. Public schools are federally mandated to provide behavioral services such as SLP, OT and PT to children that require those services under the Individuals with Disability Education Act (IDEA). However, there is a severe shortage of qualified clinicians in many parts of the U.S.  This creates a significant opportunity for a third-party company like Stepping Stones Group (SSG) to help create a national marketplace to match clinicians and schools more efficiently.
IVCA: How did Shore Capital Partners step in?
SSG: In May 2014, Shore acquired two companies simultaneously to form the Stepping Stones Group... Cumberland Therapy Services and MyTherapyCompany.  Shortly after the closings, Shore recruited me to move from Orlando to Chicago to take a role as President of SSG. I joined in early 2015 and worked with the Shore team and an experienced Board of Directors to grow the business through acquisitions and organic investments in sales, marketing and recruiting.
Along with all the financial growth, what is most exciting for me is that SSG is having a positive impact on children across the U.S. with special needs and autism... including the Cobb Pediatric Therapy Services acquisition, which was signed in December 2017. At the time of our recent sale to Five Arrows Capital Parners, SSG had over 1,200 clinicians providing direct services to more than 60,000 children across the U.S.
IVCA: Justin, what were the background and considerations for Shore Capital Partners when creating Stepping Stones Group?
Shore Capital Partners (SCP): Shore Capital Partners identified the pediatric staffing and behavioral health staffing industry as a highly attractive market for investment. Through discussions with industry experts, Shore realized that a tremendous amount of behavioral health and therapy services are provided to children in a school setting, where they spend more time than anywhere else.
School districts are required by federal law, the Individuals with Disabilities Act (IDEA), to provide specialized services to students who qualify. It is estimated that more than 6.5 million children now receive special services, such as speech and occupational therapy, through IDEA. The Act, which Congress first passed in 1975, was last reauthorized with amendments in 2004, and creates a national market for special education therapy services in U.S. public schools.
Also, school districts have found that it is easier and often more cost effective to utilize a third-party firm to recruit and manage qualified therapists, and the schools’ payments are stable, and highly attractive as compare to other healthcare funding sources. So on May 21st, 2014, Shore Capital Partners closed the simultaneous recapitalization of Cumberland Therapy Services and MyTherapyCompany, creating a platform for investment... The Stepping Stones Group.
IVCA: How did you manage those acquisitions through the years?
SCP: Over a number of years, Shore Capital developed a deep network in the healthcare staffing industry which enabled the platform to source all of its acquisitions proprietarily. We recruited independent industry experts with meaningful healthcare staffing experience and broader expertise scaling healthcare services companies to SSG’s Board of Directors, and also recruited Anthony Rintala to lead the company as CEO and complemented him with a new CFO, VP of strategy and several other key senior roles.
IVCA: Anthony, there are five separate businesses in SSG. How do they work separately and as an overall unit to provide the services that your clients need?
SSG: Each acquired company – Cumberland Therapy Services, MyTherapyCompany, AlphaVista, Cobb Pediatric and Staffing Options & Solutions –  maintained their unique brand identity with SSG as the holding company. SSG integrated the back-office operations of all acquisitions including accounting, finance, human resources, IT, technology and other areas including sales and recruiting. Many of the acquisitions had strong local-market brand recognition so we felt it was important to keep the local brands but associate all the companies through the SSG holding company name.
One of the biggest benefits to our school clients is that we could leverage best-practices from the acquisitions across the portfolio. For instance, Staffing Options & Solutions (SOS) did a terrific job recruiting new graduate SLPs and placing them on a career path with schools.  We were able to leverage the SOS new grad program across the broader SSG platform to help match new graduate clinicians with mentors so they could be more effective as they started a career working with special needs children.
IVCA: Justin, once the group of companies were in place, what were some of the specific plans that were implemented by Shore Capital Partners to assure success, and when did those plans organically affect and work within the group?
SCP: An aggressive business development strategy that eventually acquired five separate businesses in diverse geographies – two platform companies plus three add-on acquisitions – was complemented by significant organic growth in core state markets, plus significant investment in sales & recruiting, a real-time online job board showing all available positions throughout the U.S., increased focus on paid search capabilities, and online and social media marketing.
The investment in sales and recruiting resulted in nine times growth between entry and exit... five to 45 professionals. The cost-per-hire was dramatically reduced by 60% between 2015 and 2018, through more efficient sales & marketing techniques, which helped dramatically increase profitability margins.
IVCA: What about the inorganic growth that occurred by integrating the companies into five platforms?
SCP: Shore built the platform by acquiring companies with complementary service offerings and operational expertise. We unified the leadership team with an organizational structure of senior and mid-level managers. We integrated company and centralized company operations including finance, accounting, human resources, marketing and all technology functions. We improved cash collections and invoicing, as well as integrated to a single IT and technology infrastructure. We implemented clinical programs and field manager models across all the brands, which expanded service offerings for existing clients, and leveraged data and metrics to drive faster placements and higher renewal rates.
Additionally, the Group implemented operational enhancements that enabled growth from local staffing provider to national strategic partner for the school districts, because all divisions integrated onto a single IT infrastructure and the complementary third-party applications seamlessly integrated operations and billing, plus payroll functions and financial systems with the clinician base.
IVCA: Anthony, how did Shore Capital Partners impact the group in your observation, and how did the fund help you to get to a level that made SSG succeed?
SSG: Shore Capital Partners did an excellent job building a Board of Directors with deep industry expertise that proved invaluable in helping to build the strategic plan and execute against that plan. The independent board members consisted of Greg Palmer, Ron Malone, Joe Matarese, and Jim Forrest. All the board members added value in a different way, and Greg Palmer served as the Lead Director with a more active role in monitoring the operations and facilitating the strategic direction of SSG.
IVCA: Justin, Shore Capital had a successful sale of SSG last year. What motivated the decision to sell, and what made the sale successful from the firm's point of view?
SCP: SSG matured into a highly attractive target in an active M&A environment. The team set goals at the onset of the investment and when those goals were achieved –and surpassed – we explored strategic options. Also, the market became educated on the attractiveness of the school-based therapy model, with a high interest in differentiated behavioral health and autism therapy assets.
The key success factors were first, our strong historical organic growth rate, with a management team that developed a track record showing the ability to acquire, integrate and grow add-on acquisitions consistently. Secondly, through a sell-side M&A process the Firm received attractive offers from both strategic and financial buyers. Ultimately, the Firm sold to Five Arrows Capital Partners, a New York based middle-market private equity fund. Finally, SSG maintains tremendous runway for growth for its new financial sponsor, as it only serves 2% of public schools in the U.S.
IVCA: And finally Justin, what role in the VC/PE community does the IVCA play in bringing all the institutions together and creating communication for them and between them?
SCP: Based on our experiences, the IVCA is a Best-in-Class organization, executing on the following initiatives... bringing together institutions, especially Illinois-based private equity firms, to share best practices and ideas for cultivating new investment opportunities; promoting the positive impact and opportunities created by Illinois-based private equity and venture capital firms for local businesses; plus communicating the economic benefits of a healthy Illinois private equity and venture capital community.
IVCA: Anthony, to connect that same sense, what does the honor of the 2018 Private Equity Portfolio Company of the Year mean to the Stepping Stones Group, and how do organizations like the Illinois Venture Capital Association help businesses in general?
SSG: It’s wonderful to be recognized for the hard work and accomplishments. It was a tremendous period of growth which generated an outsized return for the investors and management team at SSG.  However, what’s more important is that new capital and leadership expertise are attracted to building companies that focus on helping children with special needs and autism.  This will lead to a more efficient labor market as well as gains in productivity and public-awareness about the job opportunities in school-based therapy programs. 
The IVCA does a great job promoting pro-growth and pro-investment policy initiatives for companies based in IL as well as private equity firms.  The IVCA also does a terrific job connecting various constituents in the Illinois private equity community.
For more information on Shore Capital Partners, go to www.ShoreCP.com  For more information on The Steppings Stones Group, go to www.TheSteppingsStonesGroup.com