Cerner, which provides electronic health records, is set to acquire the healthcare information technology business off of Siemens at the tune of $1.3 billion.
The valuation comes from just over one times the sales of the Siemens division.
Neal Patterson, the head of Cerner, is looking forward to what it can provide to his already impressive company. Patterson outlines the fact that his company is already the largest IT company, but with size comes the opportunity to grow. “We think scale is important. We were the largest IT company but this gets us a bigger, better business platform. We’ll have a combined $650 million [in research and development] to spend and we think the future of healthcare computing is driven around the ability to innovate. This kind of preserves our ability to spend heavily in innovation and IT certainly for the rest of this decade.” The importance of scale is undeniable as bigger companies have lower costs per action through more numbers, it also allows them to think big, and act big in the areas they feel are important, which in this case is innovation.
With the competition in the health IT industry being so stifling, this should give Cerner the ability to continue to compete with industry rivals such as, Epic Systems, AthenaHealth, AllScripts, NantHealth, and Flatiron Health.
While some would argue the strategy of acquisition on the basis that Cerner would have captured business from Siemens organically without the big buyout, Patterson defends the deal thoroughly. He does so by agreeing with the fact that Cerner would be capable of capturing some of that business over the next decade, but they would not capture all of it. It would be better for the company to be able to obtain said business and look to expanding it instead.
Pattern also outlined the fact that Cerner is purchasing a business that is within their exact expertise, there should not a prolonged integration period. By tacking on a piece of business that is already in their line of work, it could be similarly related to adding a motor to a row boat. It just gives them a boost.
See the original article from Forbes.