IBM Acquires Truven Health Analytics
- Enterprise Value $3.56 billion
- EV/LTM Revenue 5.95x
- EV/LTM EBITDA 35.74x
- IBM (NYSE:IBM) announced today that it had acquired healthcare data integration and analytics firm Truven Health Analytics for $2.6 billion, doubling the size of IBM's Watson Health business unit.
- IBM has long been diversifying its offerings and worked toward becoming a data-focused, higher-end software and services provider. A major recent focus has been the healthcare space - over the past year, the company has spent more than $4 billion on medical technology companies.
- Headquartered in Ann Arbor, Michigan, Truven provides healthcare data services to employers, hospitals and drug makers. In this acquisition, IBM gets Truven's prize data with which to improve its Watson artificial intelligence program.
- Truven was sold to private equity firm Veritas Capital Fund Management LLC for $1.25 billion in 2012 and was previously the healthcare unit of Thomson Reuters.
Doubling Down on Premium Services
- Small Size, High Importance: Watson Health is delivered as part of IBM's cloud services, which according to IBM CFO Martin Schroeter are still "fairly small" in relation to IBM's total $23 billion software business. But it is an area of critical importance as the company shifts toward higher margin cloud and analytics services that have the potential to be significantly more lucrative in the future.
- Healthcare is the New Frontier: IBM has actively pursued the healthcare niche through its Watson Health initiative, betting that by combining vast amounts of data with artificial intelligence capabilities the company can secure a leading presence in what is expected to be a profitable space. In this effort, it faces challenges from startups like Enlitic, Inc. as well as from IT giants like Google and Microsoft.
- More M&A On the Horizon: This transaction is the largest acquisition made by IBM CEO Ginni Rometty since she took over in 2012. Expect the company to continue to pursue high value acquisitions as executives aggressively counter its declining legacy core business.
- Sticking the Landing: To ensure IBM gets the maximum benefit from this and its other acquisitions, the company must maximize sales synergy and ensure a cultural fit - critical considerations in any M&A transaction.
For more information about this transaction,
click here to read the press release.
martinwolf was not the advisor in this transaction.
*IBM is acquiring Truven Holding Corp., which includes Truven Health Analytics, Inc. as a subsidiary, in a cash-for-stock purchase. The multiples provided utilize Truven Holding Corp.'s EBITDA and Revenue.
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