Company Overview

Situational Overview

Situational Overview

• In 2002, PSI was transitioning from managing hospital beds under long-term contracts to owning freestanding, acute psychiatric hospitals.

• PSI had an opportunity to buy a large hospital but needed external capital to fund the purchase.

• Existing investors offered to provide equity capital to fund the transaction but that would have required PSI to give up a substantial majority ownership position in the Company with no capital for future growth.

• BCA recommended raising subordinated debt as an alternative to equity funding. We believed PSI could raise significant funding without much dilution.

• PSI raised $20 million in subordinated debt with an initial draw down of $10 million at a cost of 4% of the Company.

Reverse Merger

• In 2002, PSI agreed to reverse merge and own a majority position in publicly traded PMR Corporation. This transaction would give PSI $5 million in additional cash and public stock currency to invest in acquisitions.

• BCA was hired to help negotiate and structure the terms of the deal as well as provide a fairness opinion to the transaction.

PIPE Financing

• In 2003, PSI hired BCA to explore various financing alternatives that would enable PSI to continue executing its acquisition strategy.

• BCA recommended a PIPE transaction.

• PSI received a minority investment of $25 million in equity, which helped position PSI as the leading consolidator in the behavioral health sector.

Transaction Result

• This series of transactions enabled PSI to evolve from a contract manager to an owner of acute psychiatric facilities and provided the initial capital to become the leading consolidator in the industry.