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.

Imprivata to be privately held after Two years as public organization

Imprivata, a famous publicly owned vendor of user and sufferer authentication, enterprise single sign-on and protect messaging software for the healthcare sector, is becoming a privately held organization, with investment firm Thoma Bravo purchasing the company for over $554 million.

That is a hefty multiple for an industry that in the 1^st quarter of the year 2016 had revenue of $31.5 million and an average loss of $6.7 million; overall, Thoma Bravo is paying almost 4 times projected yearly revenue for Imprivata.

The technology of company particularly assists healthcare contributors to secure patient data and comply with regulations, stepped into the public just 2 years ago, with an initial public offering cost for its stock of $15 a share. The stock was selling for $14.50 a share before the sale was declared, which will provide shareholders $19.25 a share in cash.

The acquisition is a strategic chance for the investment firm, claims John Osberg.

Imprivata, Osberg points out, is best-of-breed companies with products that assist hospitals to move from systems that need clinicians and workers to utilize pagers or cellphones for communication. Cell phone utilizes within hospital walls are mostly restricted because of concerns over security and medical device interference, but workers still use their phones. Pagers are inefficient devices that alerts customers to events, but only if customers have their pagers with them. Neither phones nor pagers integrate into a coherent workflow for staff.

It takes a long period for healthcare agencies to change, Osberg claims, but they’re changing now to adopt improved and more secure communication devices. “Imprivata has much intellectual property and interfaces with several IT vendors. That is worth a lot of money.”

Other reasons the purchase makes sense involve the availability of a seasoned management team and great growth prospects, he further adds. “It would seem that there is a strong pipeline of new growth and products that would enable Thoma Bravo to value the company at that premium.”

That Imprivata is losing money should not be a concern, Osberg states, because he considers management has been contributing in the company. Moreover, when the acquisition is complete, as a privately held company, Imprivata will not be restricted by the regulatory burdens that public companies confront, and that’ll save it money, Osberg notes. “It’ll be a leaner, more effective company.”

 

Why McKesson might sell its health Information Technology business

As reports surfaced previous week about McKesson considering the possible sale of its technology solutions unit, industry observers recommend that few factors may be aligning for the healthcare giant to reassess its stake in the healthcare information technology business.

To a degree, such assessments are a proposed part of the general course of business for industries in today’s economical world, claims John Osberg, managing partner at Informed Partners, a consulting firm that gives strategic business development services for healthcare industries. It is usual for huge companies to consider their portfolios and make strategic decisions, he emphasizes.

Few reports have recommended that McKesson may think about a sale now due to the present investment requirements needed to remain competitive in healthcare IT. Osberg, a mergers and acquisitions consultant, stated that he considers that McKesson for various years has not adequately funded research and development by the unit and may be recognizing that it would have to increase R&D considerably to sustain competitive.

“It has been a ignored asset to certain degree for a while now, and that compounds things,” he asserts. He likens the situation to Siemens Healthcare selling its products in the time of early 2015 to Cerner because upgrading would charge too much.

McKesson isn’t commenting on its policies or reacting to comments from industry insiders; a spokesman late Friday stated that the company doesn’t comment on rumors and speculation.

Initially this year, McKesson agreed to sell its small physician practice EHR and practice management systems to e-MDs, appreciating the purchaser could better service the clients. The acquired software involved the Practice Choice, Medisoft, Medisoft Clinical, Lytec and Practice Partner product lines.

In the time of accountable care and value-based compensation, vendors are under the gun to empower investments and come out with latest product features. In specific, McKesson’s competitors, like Epic and Cerner, have been investing hundreds of millions of dollars into their products, claims the Ken Kleinberg, managing director of the research and insights at the institute of Advisory Board Company, a consultancy.