Data-driven improvements, cloud technology fuel healthcare M&A, like Inovalon’s Ability deal
Inovalon (Nasdaq: INOV), a provider of cloud-based software for the healthcare industry, has agreed to acquire Ability Network, a developer of Software-as-a-Service (SaaS) tools designed to simplify the administrative and clinical complexities of healthcare, from Summit Partners and other investors for $1.2 billion in cash and restricted stock. The combination of Inovalon and Ability is designed to create a vertically integrated cloud-based platform empowering the achievement of real-time, value-based care from payers, manufacturers, and diagnostics all the way to the patient’s point of care.
“This will be an industry-leading combination, resulting in the creation of a vertically-integrated leader in cloud-based enablement of data-driven, value-based care,” said Keith Dunleavy, M.D., chief executive officer and chairman of the board of Inovalon, in a statement. “The addition of Ability’s innovative platform-based applications, extensive provider client base and connectivity, and efficient, high-volume distribution channel will enable Inovalon to deliver increasingly differentiated value to both Ability’s provider customers and Inovalon’s established client base, as well as drive significant growth and accretive financial performance for our shareholders in 2018 and going forward.”
“Inovalon and Ability share important commonalities – a common mission to enable data-driven improvements in healthcare, and a common technology vision focused on cloud-based platform architecture, real-world data, connectivity, and a recurring subscription-based model,” said Mark Pulido, chairman and chief executive officer of Ability.
Inovalon focuses on enabling the assessment and improvement of clinical and quality outcomes and financial performance across the healthcare ecosystem. The company’s customers health plans and provider organizations, and pharmaceutical, medical device, and diagnostics companies.
Ability provides applications aimed at helping with revenue cycle management (including claims, eligibility and remittance), clinical management (including clinical intelligence) and overall performance improvement (including analytics and benchmarking) via an integrated platform that connects payers and providers. Ability’s offerings are used by more than 44,000 acute, post-acute and ambulatory point-of-care provider facilities, according to the company.
The deal is expected to close in April, subject to regulatory approvals and customary closing conditions. Upon closing, Pulido is expected to join Inovalon’s board of directors and serve as an advisor on the integration of Ability with Inovalon. Jamison Rice, chief financial officer of Ability, will serve as general manager and divisional president of Ability and join Inovalon’s executive leadership team, reporting to Dunleavy.
In 2014, Ability received a $550 million strategic investment, led by Summit Partners, a global growth equity investor, and joined by other capital partners. The recapitalization came three years after Ability received a $27 million capital investment from Lemhi Ventures and Bain Capital Ventures. Ropes & Gray advised Summit Partners on the sale.
Healthcare information technology companies are proving increasingly attractive to buyers. Some of the recent activity includes: R1 RCM Inc.’s (Nasdaq: RCM) purchase of Intermedix Corp. for about $460 million; EQT has agreed to acquire a majority stake in healthcare technology provider Certara; Francisco Partners made a growth equity investment in healthcare information company Availity; Fidelity National Financial Inc. (NYSE: FNFV) has agreed to buy medical software and documentation provider T-System Holdings; and New Mountain Capital-backed Ciox Healthacquired data service company Arrohealth.