The Alpharetta, Ga.-based developer of supply chain and revenue management solutions added e-procurement to its portfolio through an Aug. 25 partnership with Prodigo Solutions, then followed with the September acquisition of The Broadlane Group – thus positioning the company as one of the largest group purchasing organizations in the country.
"The Broadlane Group and MedAssets are an outstanding strategic fit, and this combination offers numerous benefits for our clients and stakeholders," said John Bardis, MedAssets' chairman, president and CEO, in a Sept. 14 press release announcing the $850 million deal, which is expected to be completed within two months. "We are bringing together some of the best contract pricing in the industry, with highly complementary technology and clinical consulting expertise from both companies. Our core strategy is to enable broader clinical and operating effectiveness throughout our nation's health system, and this transaction will further enhance our ability to help hospitals and other healthcare providers drive their operating and supply costs lower, while improving patient care."
Dallas-based Broadlane offers supply chain management, strategic sourcing of supplies and services, capital equipment lifecycle management, medical device or PPI cost management, centralized procurement, clinical and lean process consulting and clinical workforce optimization solutions.
"This transaction offers an exceptional opportunity to bring together two very strong enterprises and deliver end-to-end cost management capabilities," added Patrick Ryan, Broadlane's chairman and CEO, who is expected to join MedAssets' board of directors and become the company's president of the spend management segment upon completion of the deal. "As a combined entity, we offer a strategic opportunity for our clients to drive operating expenses down while improving quality of care. The collective strengths of The Broadlane Group and MedAssets will provide expanded supply chain capabilities, and further enhance the financial improvement opportunities, both near and long-term, for our healthcare provider clients."
According to Reuters, the deal caused an 8 percent drop in MedAssets' stock price just after it was announced and produced reactions from at least two analysts.
"We believe the acquisition multiple is rich for the low growth GPO business, and the required financing is likely to push capital structure into excessive debt levels," Piper Jaffray analyst Sean Wieland said.
"In our view, the deal makes strategic sense as it eliminates a formidable competitor on the spend management side, adds scale, and will likely open doors for potential revenue cycle management cross-sales," added ThinkEquity's Glenn Garmont.
MedAssets' deal with Prodigo, a Pittsburgh-based subsidiary of the University of Pittsburgh Medical Center, gives the company another inroads into the electronic procurement marketplace. Prodigo's tools can integrate with leading enterprise resource planning systems like PeopleSoft, SAP and Oracle or support healthcare systems that don't have an ERP system.
"As the healthcare community seeks to produce the quality improvements and cost control that are the focus of national reform, we are pleased to help our provider customers reach those goals by offering Prodigo's e-procurement solutions," said Rand Ballard, MedAssets' chief customer officer and chief operating officer.. "Major health systems, including UPMC, have demonstrated that Prodigo's tools can drive lower costs, higher efficiency and improved contract compliance – an outcome that benefits patients and payers."
MedAssets is buying Broadlane from TowerBrook Capital Partners, a private equity firm that acquired the company in August 2008. Since then, TowerBrook had broadened the company's management team, expanded its product lines and acquired three complementary healthcare companies.
"We have worked very closely with the Broadlane management team over the course of our investment to re-position the business in order to fulfill the company's tremendous growth potential and the needs of healthcare providers and suppliers," said Ian Sacks, TowerBrook's managing director. "We believe the combination with MedAssets will enable Broadlane to continue to bring value to the broader marketplace."
The deal – in the form of a $725 million cash payment at closing and a $125 million cash payment in January 2012, is expected to add $20 million to MedAssets' coffers in the coming year. MedAssets has obtained financing commitments from J.P. Morgan and Barclays Capital to complete the transaction.