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| Mirage SoftGel nasal mask--Courtesy of ResMed |
Respiratory specialist ResMed ($RMD) announced that it is acquiring software company Brightree for $800 million in a bid to provide administrative solutions like billing services to users of its home/durable medical equipment.
Brightree's business management platform enables document management, electronic purchasing, analytics and other tools to suppliers, hospice providers and pharmacies. In addition, its billing services platform helps them manage revenue by logging and confirming sales.
San Diego-based ResMed said Brightree's healthcare provider customers serve patients with a high prevalence of sleep-disordered breathing, COPD and neuromuscular disease, which can be treated with devices like ResMed's respiratory masks and patient monitors to treat sleep apnea.
"This acquisition furthers ResMed's position as the leading tech-driven medical device company and gives our customers new tools to help them increase operational efficiency and improve cash-flow while delivering best-in-class patient care," said ResMed CEO Mick Farrell, in a statement. "ResMed is already the recognized global leader in remote patient monitoring and connected healthcare solutions. This acquisition will enable us to add to our portfolio of digital solutions to drive operational excellence and improve outcomes for patients, providers and payers."
Lawrenceville, GA's Brightree had net sales of $113 million and pre-tax earnings of $43 million in 2015.
ResMed will fund the acquisition, expected to close by the end of FY 2016, primarily with debt. Equity analyst Raj Denhoy of Jefferies said that the company paid a premium of 13.5 times Brightree's trailing 12-month earnings when taking $300 million in tax savings over the next 15 years into account.
Denhoy described the move as a "horizontal acquisition," because it greatly expands ResMed's offerings to customer of its sleep apnea humidifiers and other devices.
"Although there is some product overlap particularly in CPAP compliance, the transaction will greatly expand the company's software offerings to include capabilities ranging from revenue cycle to CPAP re-supply management. Importantly, there also seems to be room for revenue synergies given that the company's current reach into the US HME/DME channel seems deeper than Brightree's despite the latter company being the leader in the software space. More specifically, Brightree has a total of 2.5k customers, the majority being HME/DMEs, which compares to a total end market that stands at about 4.0-5.0k according to management. Outside of the core channel, Brightree also has exposure to the Home Health and Hospice verticals which are new to ResMed," he wrote in an analyst note.
The deal is a exit for Boston VC firm Battery Ventures, which invested in Brightree in 2008. The firm says it boosted Brightree revenue to $113 million from a base of $8 million through organic growth and multiple tuck-in acquisitions.
"Software-as-a-service (SaaS) companies with strong, industry-specific products and top-notch management teams are consistently sought after by strategic acquirers--as evidenced by this deal," said Battery general partner Neeraj Agrawal in a statement. "Battery is proud to have backed Brightree and we continue to be a big believer in cloud-based applications."
- read the release from ResMed
- here's more from Battery Ventures