M & A Roundup – Washington Update: Philips Moves Further Into Health Services

Building on its diagnostic imaging capabilities, Royal Philips Electronics NV, Europe’s largest consumer electronics manufacturer, moved further into the health care services sector with its $1.2 billion acquisition of 60% of MedQuist Inc., the leading U.S. provider of electronic medical transcription services. Better known for its television sets and electric shavers, Philips is pursuing a strategy of expanding its health care-related services offerings, focusing on areas that might benefit from its core competencies in electronics. Already a strong player in diagnostic imaging systems and services through its Philips Medical Systems division, the company can exploit the synergies between imaging and medical transcription services to offer its customers a full range of products and services. Philips Medical provides advanced X-ray, magnetic resonance, ultrasound, and imaging information systems. Philips is also a pioneer and a global market leader in speech recognition technologies through its Philips Speech Processing unit. Marlton, N.J.-based MedQuist also has a strong position in the hospital’s information chain. Radiology departments, where most of the imaging systems are used, are some of the heaviest users of medical dictation services. Additionally, Philips’ expertise in speech-recognition technology combined with MedQuist’s transcriptions capabilities could form of the basis of advanced transcription technology in the future. “This acquisition moves us further into health care services, which is in line with our stated strategy, and provides us with significant growth opportunity, as well as leveraging our speech technology capability,” said Cor Boonstra, CEO of Philips, in a printed statement. He added that MedQuist would be able to use Philips’ technologies to begin its “transition to its new digital transcription platform via regional data centers,” providing it with additional growth opportunities. Analysts note that the acquisition, which is in a related though not core area for Philips, creates a platform for making additional acquisitions in the field and provides Philips with the benefits of owning a controlling interest in a operation which can be run, and valued, separately from the core business. Philips’ investment will accelerate MedQuist’s plans to expand into Europe, where Philips Medical Systems and Philips Speech Processing already have strong relationships with hospitals. MedQuist plans to aggressively roll out Philips’ speech and other technologies, which will allow for significant productivity improvements in the conversion of dictated medical information into written text. The two companies also plan to expand MedQuist’s current offering of outsourced transcription services to include in-house speech recognition software sales.