Three years ago, Veritas Capital purchased Truven Health Analytics for $1.2 billion. Fast forward to Thursday, February 18, when IBM Corp. announced that it plans to pay $2.6 billion for Truven.
That aggressive purchase gives an idea of how serious IBM is about succeeding in the healthcare arena with its Watson Health technology, says John Moore, managing partner at Chilmark Research.
Asked if IBM paid too much, he adds: “Value is in the eye of the beholder. IBM is making a serious bet in healthcare and has tremendous resources. Senior executives are repositioning the company.”
The acquisition is IBM’s fourth major buy in healthcare during the past year, having previously bought population health management vendor Phytel, cloud-hosted analytics company Explorys and medical imaging software vendor Merge Healthcare. In total, the deals cost Armonk, N.Y.-based IBM more than $4 billion.
Truven is the big trophy, however, with a treasure trove of provider and payer clients that Watson Health does not have, along with huge amounts of clinical and financial data, says John Osberg, a managing partner at Informed Partners LLC, which facilitates mergers and acquisitions.
Now that IBM has a lot of valuable data, the question is whether the company will be able to make money with it. But one thing is clear, Osberg believes: the larger organization now has more capacity than it did a year ago. IBM estimates a total workforce of more than 5,000 employees in the Watson Health line.
The big challenge will be integrating the four companies, Osberg adds.
Moore at Chilmark Research sees another major challenge: “How IBM pulls everything together at a price point the market can afford remains to be seen.”
Truven has a substantial reach into the payer analytics market, as does Optum, the health data services platform of UnitedHealth Group, which also operates insurer UnitedHealthcare. But many insurers don’t want to do business with Optum because UnitedHealthcare is a competitor, and IBM can benefit from this, Moore says.
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