KKR to Acquire a Stake in Cotiviti From Veritas Capital

The transaction would give the two New York-based firms equal ownership stakes in Cotiviti, according to an announcement planned for Wednesday. The Wall Street Journal reported in December that the firms were in discussions.

The deal would rank among the largest recent private-equity transactions. Buyout firms slowed dealmaking after the Federal Reserve began raising interest rates in 2022, with the debt used to finance acquisitions getting more expensive and harder to obtain.

The deal would also represent a significant payday for Veritas, which took Cotiviti private for about $4.16 billion in 2018. The firm specializes in buyouts of companies at the intersection of technology and government.

Veritas previously explored a Cotiviti deal with private-equity firm Carlyle Group, based in Washington.

Veritas plans to invest new capital in Cotiviti alongside KKR’s commitment to help fund the company’s growth. The deal with KKR is expected to close in the second quarter following regulatory approval.

Cotiviti makes regulatory and cost-control technology for healthcare providers and insurers. Based in South Jordan, Utah, Cotiviti says it works with more than 180 healthcare payers including the 25 largest health plans in the U.S.

The deal would also be one of the largest recent transactions for KKR, which manages about $553 billion. The firm last year completed a $1.62 billion acquisition of publisher Simon & Schuster, and at the beginning of this year announced it had acquired the portion of insurer Global Atlantic that it didn’t already own.

The deal could be a sign that large private-equity mergers are becoming more viable after a dismal 2023. Global private-equity deal activity fell to $846 billion last year, 40% lower than in 2022 and the lowest annual total since 2013, according to data-provider Dealogic.

KKR’s Cotiviti acquisition will be financed by bank debt, according to people familiar with the matter, rather than by private lenders, as has become typical for private-equity transactions in recent years.

Banks have become more reluctant to finance takeovers due to high costs of capital and numerous “hung deals," or transactions in which the bank has difficulty reselling leveraged-buyout debt. That decline in lending has given nontraditional lenders such as private-credit firms a bigger share of the business of financing buyouts.

KKR’s investment in Cotiviti comes from KKR North America Fund XIII, a $19 billion vehicle closed in 2022, and Veritas’s new investment comes from Veritas Fund VIII, a $10.65 billion pool that closed the same year.

Write to Chris Cumming at chris.cumming@wsj.com and Laura Cooper at laura.cooper@wsj.com