Additional Thoughts on Thomson Reuters

Last week we posted an analysis of the pending sale of Thomson Reuters’s Healthcare unit. Since publishing that analysis Chilmark has received feedback, privately, from several, extremely knowledgeable people as to their thoughts on this sale and others who companies who may be equally interested in acquiring the healthcare business from Thomson Reuters. Below is a quick summary of their feedback with our perspective:

EMC: They have been building out their health sector business unit but by and large it has focused on “big iron” (large server farms) and cloud computing services. EMC currently does not have much on the BI/analytics side in its offering and the TR portfolio would slot-in quite nicely to make a play in the market somewhat similar to Dell. They certainly have the cash, but do they have the will to head in this direction is the big question. We believe probability to be slightly lower than Dell’s at ~50%.

Private Equity Firms: The TR healthcare unit is quite profitable with good margins and might be an attractive target for their portfolio. Chilmark’s only reservation here is that these firms are extremely savvy buyers and don’t pay large premiums and may see recent health IT company evaluations as currently being in a bubble stage. Put probability low at 35%.

Reed Elsevier: We missed this one and is a very good candidate. There is some overlap in product portfolio but not much and Elsevier signaling its intent to play a larger role with pending acquisition of HIE vendor dbMotion could layer in TR’s portfolio, much like TR is doing today in its partnership with HIE vendor Care Evolution. Reed Elsevier may have to unload a couple of properties due to anti-trust concerns to for this acquisition to occur. Such an acquisition has a high probability in the range of 60-70%.

Trizetto: Trizetto’s primary market is the payers and a significant portion of TR healthcare’s business comes from this sub-sector. Trizetto is also not adversed to making acquisitions to fill-out its portfolio, Acquiring TR’s healthcare unit would fit nicely within the Trizetto solution suite with little overlap and subsequently add capabilities they currently do not have, including an ability to combine claims and clinical data. Chilmark likes this suggestion as well though unsure if Trizetto is in a position to make such a large acquisition. Chilmark will be attending AHIP this week so maybe we’ll have a better read on the potential by end of week. Right now, we would put Trizetto at about 40-50% probability.

With roughly $90M in profit last year, the TR healthcare unit it is not beyond reason that the final acquisition price is in the range of $1.6-1.8B, maybe even higher if the synergies and needs of the acquirer are particularly strong. The rapid changes now taking place in the healthcare sector, including digitization of clinical records via the HITECH Act, make this a particularly attractive target for the right buyer. Who that buyer ultimately is may foretell much of what is yet to come in the healthcare IT market.

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Posted in Acquisition, Analytics, Health Information Exchange Tagged with: , , ,
3 comments on “Additional Thoughts on Thomson Reuters
  1. jim says:

    what happens to the current employees (analysts, managers, etc) of TR’s health group? would a potential suitor just be buying the data/IP or will they keep the employees as well?

  2. Duncan Enright says:

    The big range of suitors indicates another reason why Thomson may be exiting: this marketplace is complex and immature, with many players and interlocking partnerships needed to make it work. As it matures elements will become commodotised and of low value, and that isn’t attractive to TR.

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