Acquisition: Security vendors combine as Auxilio purchases CynergisTek

CynergisTek, a famous healthcare privacy and information security consultancy, now is part of document management/information technology security firm Auxilio following an acquisition. Security vendors will combine as Auxilio buys CynergisTek.

Auxilio will pay as much as $26.8M in cash, stock and seller debt with extra payments of as much as $7.5 million over 5 years if CynergisTek meets some financial performance metrics, for a possible complete cost of $34.3 million. Auxilio already owns data security vulnerability testing and assessment services firm Redspin and risk management vendor Delphiis, which will be combined into CynergisTek.

CynergisTek leaders Mac McMillan and Michael Mathews will merge with the board of the combined entity and have important ownership stakes. CynergisTek will operate independently, but chances exist to provide combined services over time, claimed Auxilio CEO Joe Flynn in a statement. “We’ve long stated our wish to expand our reach in healthcare information technology security, and this acquisition puts us in an instant leadership position in the category,” Flynn added.

Auxilio competes against such heavyweight document management firms as HealthPort and MRO, but is well-capitalized with great management, claims John Osberg, a merger and acquisition specialist at consultancy Informed Partners.

Auxilio purchasing CynergisTek to expand into the advisory services market is a smart move, Osberg considers. Auxilio has electronic technology to assist hospitals secure their written documentation by controlling whom, when and where documents can be printed. In essence, it specializes in automated risk assessment procedures. Security vendors will combine as Auxilio purchases CynergisTek.

Now, Auxilio will integrate its existing security holdings—Delphiis, RedSpin and CynergisTek--into a single cybersecurity agency. CynergisTek will increase its capability to offer information technology staffing services to hospitals.

Merging into Auxilio was a chance for CynergisTek to continue growth as a publicly held company, McMillan further adds. “The logic of the matter is, to take it to the next level will take more than our energy.”

While the final name of the entity isn’t still clear, McMillan, who’ll serve as president of Auxilio and CEO of CynergisTek, expects to keep the CynergisTek brand alive to maintain industry recognition.

CynergisTek, identified by security vendors research firm KLAS as the largest-rated healthcare firm for security consulting in the year of 2016, also brings revenue to Auxilio; having produced $15 million in revenue during the year of 2016 and $5 million in earnings before taxes, interest, depreciation and amortization.