Dealmaking surrounding health information technology businesses has been on the upswing in recent weeks, with private equity players driving much of the activity.
Private equity firms are buying, selling and making partial investment in health IT, an industry they view as primed for future growth.
The financial markets are starting to take notice of the opportunities, and are putting their funds behind the healthcare technology sector, said Vern Davenport, executive vice president and general manager of Misys Healthcare Systems, a Raleigh, N.C.-based division of software company Misys, in an e-mail.
The fact that the deals featured the heavy involvement of investment companies paying reasonable prices indicates that they were looking for opportunities for future growth, and not a one-time acquisition at bargain-basement, fire-sale prices, said Stephen Lieber, president and chief executive officer of the Healthcare Information and Management System Society. The involvement of the investment community is something we all should be watching and paying attention to, Lieber said. Clearly, an equity firm is not doing it to serve any not-for-profit good. Theyre clearly motivated by Is this a good business opportunity?
The interest in health IT is producing some complicated arrangements. Francisco Partners sold its Bellevue, Wash., revenue-management systems provider, Lynx Medical Systems to Picis, just weeks after the investment firm had bought Dairyland Healthcare Solutions, Glenwood, Minn. To buy Lynx, Picisa Wakefield, Mass.-based developer of information systems for intensive-care units and emergency departmentswill use part of $155 million that Goldman, Sachs & Co. recently invested in Picis.
In a less complicated deal, private equity firm Thoma Cressey Bravo agreed to buy a 58% stake in Hyland Software from private shareholders for $265 million.
Meanwhile, software company Misys was in paring-down mode with the goal of reducing debt and increasing its focus in healthcare on its physician clients with two deals to sell. The company agreed to sell its diagnostics business to private equity firm Vista Equity Partners for $381 million and its hospital electronic health-record product to QuadraMed Corp. for $33 million.
And the largest HIT deal announced recently involved Munich, Germany-based Siemens plan to acquire Dade Behring, a Deerfield, Ill., clinical diagnostic company for $7 billion, which offers its EasyLink Informatics System middleware connection among its many product lines. Siemens will combine Dade with its Medical Solutions Group in Malvern, Pa.
Officials for clinical systems developer Picis said that its two deals were not about saving on costs but adding revenue. Picis has grown 1,200% in the past four years, while Lynx has grown 800% during the same time, so bringing the companies together is not about trying to merge operations to save money, said Todd Cozzens, president and CEO. Both are growth companies, trying to keep growing, he said. This isnt about synergies of cost savings, its about synergistic increments of revenue.
At Hyland Software, Westlake, Ohio, executives said its deal is more of a partnership in which the equity firm will provide capital and expertise to help Hyland grow by its own acquisitions. Bill Priemer, Hyland executive vice president and chief operating officer, said Thoma Cressey Bravo looks for healthcare and software companies to serve as a platform or foundation for further acquisition in industry segments that are ripe for consolidation.
But for Misys, its two deals will allow its healthcare unit to focus its research and development in one area. Our greatest opportunity for growth lies in the ambulatory space and in building connected communities, and we are re-balancing our portfolio in order to execute that strategy and drive value, Davenport wrote.