MedAssets, Inc. has agreed to acquire Accuro Healthcare Solutions, Inc., a provider of revenue cycle management software.
The transaction is expected to be completed within 60 to 90 days.
MedAssets officials say the acquisition will expand its leadership position in hospital-based revenue cycle management by creating a broader and more comprehensive suite of RCM ASP-based software and service solutions.
Under the terms of the agreement, MedAssets will pay approximately $207 million in cash and $8.85 million in shares of MedAssets common stock, plus a deferred payment of $20 million due 12 months after closing. The total transaction value is approximately $350 million, inclusive of Accuro's $100 million debt outstanding.
"The primary reason for this transaction is to increase the value we can collectively deliver to hospitals and health systems. We are broadening MedAssets' revenue cycle management solution suite with the addition of Accuro's best-of-breed, ASP-based products," said John A. Bardis, chairman, president and chief executive officer of MedAssets. "These comprehensive RCM capabilities are all focused on helping healthcare providers achieve significant and sustainable financial improvement as well as optimize revenue integrity in their RCM process. In addition to being an outstanding strategic fit, the simplicity of Accuro's subscription fee-based revenue provides a predictable financial model."
"We are confident this transaction will deliver significant near and long-term benefits," said John K. Carlyle, chairman and chief executive officer of Accuro Healthcare Solutions. "The combination of these two companies will offer expanded RCM capabilities, and should further enhance the financial improvement opportunities for our healthcare provider customers."
The combination of MedAssets and Accuro creates a healthcare ASP-based technology and services provider with 2007 expected revenues of approximately $278 million. This includes more than 3,300 U.S. hospitals, and 2,000 of them are RCM hospital facility customers.
"This transaction will also create EBITDA margin improvement sooner through the coordination of certain product development resources, the segmentation of certain overlapping products, and an elimination of duplicative corporate overhead expenses," said L. Neil Hunn, MedAssets' chief financial officer. "Further, we expect this transaction will drive additional customer and shareholder value by leveraging our combined sales force to win new business and cross-sell our broad and comprehensive capabilities to existing customers."
"More than 90 percent of Accuro's revenue is recurring in nature due to its ASP-related subscription fees, which is comparable to our current recurring revenue trends, and provides tremendous visibility into the business growth outlook on a 12-month basis," Hunn said. "Assuming a July 1, 2008 closing date and not adjusting for potential deferred revenue discounts, we believe Accuro will add approximately $37 million to $40 million in revenue to MedAssets this year."
"We are confident about the numerous benefits as well as opportunities for synergy that this combination will offer to our customers and stakeholders," said Bardis. "This combination also accelerates our objective of becoming the clear ASP-based technology leader in the healthcare revenue cycle industry."
MedAssets also expects to exceed published, consensus analyst expectations for total net revenue for the 2008 first quarter. It is estimated between $58.0 million and $59.0 million. Officials said that the results were driven by higher-than-expected revenue and operating performance in the Spend Management segment, and in-line revenue and operating performance in its Revenue Cycle Management segment.