Play with Conviction

Labor Day weekend witnessed the start of the college football season, including a number of close contests and hard fought victories.    However, the wins by Notre Dame, Michigan and Stanford commanded my special attention, as they all prevailed, handily, over teams possessing considerably less competitive prowess.    As their margins of victory grew, their competitive edge hardened without a hint of casualness to be observed.   Indeed, they played with conviction well after their victories were sealed reinforcing the reality that the score on the board at the end of the game is the only score that matters.

During the last several weeks, 3 firms exhibited a similar gridiron-like intensity on the heathcare IT playing field — where games last more than 4 quarters and leave no room for complacency — by executing M&A transactions that were the equivalent of long-yardage plays intended to increase the score for shareholders:

  • Roper Acquired Strategic Healthcare Programs (SHP): SHP is a provider of software and informatics solutions to the post-acute healthcare market.  SHP delivers data-driven clinical, financial and operational insight to over 3,000 post-acute organizations, such as home health, hospice and home infusion providers.
  • Premier Agreed to Acquire Aperek:  Aperek (formerly Mediclick) is a SaaS based provider of real-time healthcare supply chain solutions focused on purchasing workflow and supply chain analytics.   Premier serves 3,000 member hospitals and 110,000 alternate site providers.
  • MedAssets Agreed to Acquire SG-2: SG-2 is a provider of healthcare analytics, market intelligence and strategic planning consulting services that help hospitals and health systems prepare for future market dynamics by using predictive analytics to identify and prioritize growth opportunities.   SG-2 has more than 1,400 clients and over 4,400 hospitals and 122,000 non-acute healthcare providers use MedAssets’ software.

Football is often a game of inches, but teams that play with conviction run big, bold plays whether or not victory is assured.    Roper executed its acquisition of SHP despite having outperformed the S&P 500 index during the first half of play in 2014.  By comparison, MedAssets and Premier trailed the competition, but hope to improve their standing on the stock market’s scoreboard after “going deep” with M&A.     These firms share in common a game plan that includes plays that “look down field” – longer range planning and third party transactions intended to improve customer channel access, cross-sell existing solutions and expand solution suites via new product development.

Just as we can expect Stanford, Michigan and Notre Dame to continue their success throughout this season, so too should we anticipate that MedAssets, Premier and Roper will continue to deploy capital with a focus on those areas of the playing field that exhibit weak coverage and provide opportunities for yardage gains.    The game tapes from the last several weeks highlight that healthcare IT firms that play with conviction will make M&A an integral part of their strategic playbook, irrespective of what the score is at the end of any specific quarter.