Tag Archives: Compugroup Medical

SPI Digital Health: Race Ready and Raring to Go, but KHZG Vendors Warn of Project Delays

As DMEA2023 wrapped up in Berlin last week, it was clear that two topics had dominated discourse among participants. One was Oracle Cerner’s ongoing tribulations in Germany with its i.s.h.med EHR solution (which Signify Research explored last week in this Insight). The other was, inevitably, progress (or the relative lack of it) on the Germany Hospital Futures Act (KHZG) from the perspective of vendors waiting for hospitals to award contracts. 

According to the Bundesamt für Soziale Sicherung (Federal Office for Social Security), as of mid-April, €2.9BN out of the total €3BN in federal funding had been approved, covering around 6,070 KHZG-related IT projects.  

Hospitals are starting to receive some of this money, but IT vendors at DMEA said this is not yet translating into a steady stream of contract awards. Consensus in Berlin was that this will only start to happen later this year, with contract award activity peaking through 2024. 

The Signify View 

Signify Research’s regular observations in recent months that the bulk of the impact of KHZG is back-loaded towards the end of the funding period (2021-2024) was vindicated at DMEA. Realistically, vendors do not see full implementation of IT systems under KHZG being complete before 2026/27. They claim that an IT manpower shortage in Germany means they cannot commit to the timescales needed to execute all the 6,000-plus projects approved. 

As well as being a source of frustration for hospitals in dire need of digitalisation, any delays also leave vendors – who have invested a lot of time, expertise and money in product development to meet the technical criteria of KHZG’s 11 pillars – playing a waiting game for now. Most IT vendors with ambitions to serve KHZG are, from a technical perspective, race ready and raring to go. But with only a finite amount of skilled resources to implement projects, and only a trickle of contracts coming through anyway at this stage, there isn’t much of a race for them to run right now. 

Any rollout delays also raise the spectre of spiralling project costs. With German inflation averaging 8.2% in the first three months of 2023, cost overruns are a real prospect. In this scenario, hospitals would either need to find additional money to complete projects, project scopes may need to be scaled back, and/or vendor margins will be squeezed.  

CGM Manoeuvres into Position 

Nevertheless, vendors continue to prepare for what is expected to be a rush of contracts later this year and next year.  

In the run up to DMEA, Signify Research predicted (read the Insight here) the top five themes that would dominate at the show. One was to reiterate our (long-held) belief that both CompuGroup Medical (CGM) and Dedalus are in prime position to support multiple different KHZG pillars. Both vendors reported healthy organic growth in their Hospital Information Systems (HIS) businesses last year (CGM grew 8% and Dedalus an estimated 15%) and will achieve further growth in future via acquisition or partnerships with KHZG in mind. 

It was fitting, then, that the day before DMEA opened, CGM announced it had taken a 51% stake in specialist patient portal provider m.Doc. 

Project Priorities 

This is a smart move by CGM. Patient portal is the second most popular KHZG pillar in terms of the number of funding applications received from hospitals (electronic documenting of patient files being the first as shown below). 

CGM has had some success with its Clickdoc virtual care platform to date, but m.Doc is an established name in the sector. It has more than 300 hospitals on its books, and is accredited to meet the technical criteria of the KHZG patient portal pillar. This acquisition will turbo-charge CGM’s non-organic HIS growth, and there is every chance the company will become a disruptive influence in the patient portal pillar, where German vendor samedi and French telehealth specialist Doctolib are also competing. Doctolib, which began life in French primary care, has made a big play in the German hospital market precisely with KHZG in mind. 

CGM’s move to acquire 51% of m.Doc also reinforces Signify Research’s assertion, stated earlier in this Insight, that it and Dedalus are ideally equipped to support multiple different KHZG pillars. For its part, CGM is now active in patient portals, medication management, emergency room, IT, decision support systems, hospital telemedicine, cloud computing and hospital bed capacity management pillars. Dedalus, meanwhile, bought Dosing in 2021, allowing it to address the fourth and fifth pillars of KHZG.  

Future Fears  

Perhaps reflecting the time that hospital managers currently have to consider long-term strategy during the relative calm before the contract award ‘storm’ later this year, another discussion topic at DMEA centred on the ongoing maintenance and support that German hospitals will need for the big IT systems they are procuring under KHZG.  

It is widely acknowledged (most recently by the German health minister) that hospital IT systems in the country lack the quality of those installed in US hospitals. KHZG funding will go some way to reducing this gap, but once that funding has been spent, hospitals will have much higher ongoing IT costs, whether to service SaaS-based IT contracts or operational/maintenance support contracts for on-premise IT. As it stands, this is a point of concern for hospitals, and many are looking to the Federal government for indications as to how this will be addressed over the longer term.  

Furthermore, German hospitals self-assess the complexity of their EHR platforms against the EMRAM hospital standard. Most hospitals are at 0 to 1 on EMRAM, and improving the maturity of their EHRs will take time and require additional funding long after KHZG is complete. 

Calm Before the Storm 

With nearly all federal funding now approved for KHZG IT projects, the gaze now falls firmly on hospitals, which are starting to receive money, as they go out to tender. 

There is a sense now that the market will soon begin to really ramp up. The waiting game that the hospitals and vendors have played for the last two years is nearing its end, certainly in terms of contract awards. 

The German healthcare industry will have factored some capacity challenges into their equations – after all, implementing 6,000-plus sizeable projects across the country pretty much simultaneously over two years is a big undertaking. But, given that vendors are likely to be maxed out on resources as KHZG contracts are awarded means there will need to be some push back on timings. 

In any case, it will soon be all hands to the pump.

SPI Digital Health: Signify Research’s Top Five Predictions for DMEA2023

For many years the annual DMEA meeting in Berlin was very much a German affair; however, more recently the show has become Europe’s leading pan-continent digital health IT conference and exhibition. Whilst the agenda at DMEA2023, which will take place from 25 to 27 April, will still have a German bias, issues discussed, and products showcased, increasingly impact healthcare IT development across Europe. Here’s our take on the leading themes.   

KHZG: Funding Translating into Contracts  

Two years after coming into force, Germany’s Hospital Futures Act (KHZG) is slowly delivering on its goals to digitalise the nation’s hospital network. However, it is taking time for government funding to trickle down to IT vendors.  

Two vendors that Signify Research has historically forecast would benefit considerably from KHZG were CompuGroup Medical (CGM) and Dedalus. Whilst both vendors’ business in related markets grew in 2022 (CGM’s Hospital Information Systems group grew 7% and Dedalus’ DACH business is estimated to have grown ‘in the teens’), much more is to come. 

To an extent the fund allocation process has resulted in the bulk of the impact being back-loaded towards the end of the funding period (2021-2024). First, hospitals had to apply for funding by pillar. After being allocated funding, IT tendering began, with IT contract awards coming last. This impact was first felt in 2022, with more substantial effects being seen in 2023.  

Another reason why the impact has been slower for larger generalist hospital IT vendors is that initial activity was focused on KHZG’s ‘easier’ elements. Funding has been allocated by pillar, across 11 pillars (detailed below), with the initial focus on pillars where overheads, in terms of implementation, were lower. For example, the below shows that Digital Care and Treatment Documentation (mainly comprising dictation solutions) was the most funded pillar, followed by Patient Portals. More complex and costly areas in terms of implementation, such as Emergency Room IT and Process Digitalisation, ranked lower. Expect more to come in terms of more complex pillars over the latter half of the funding period.  

Source: November 2022 German hospital digital maturity assessment co-ordinated by Digital Radar (DR)

Many IT contracts to service this funding will now move towards contract allocation. Expect IT vendors at DMEA to position themselves as go-to-vendors for specific pillars, with a handful, such as CGM and Dedalus, positioning themselves as best equipped to support a multitude of pillars.    

Record European Government Investment in Digital Health IT  

Germany is not alone in allocating significant new public funding for healthcare IT projects in recent years. For many EU countries the post-COVID EU Recovery and Resilience programme was a key vehicle for revitalising and increasing the digital maturity of healthcare IT in general, with large amounts of public money allocated to projects. In specific countries new, well-funded projects were announced during COVID (some linked to the EU programme, some not) to upscale the sophistication of IT in European hospitals and elsewhere in the healthcare ecosystem. 

Examples include Gara Sanità Digitale (Italy), Ma Santé 2022 (France) and Le programme HOP’EN (France). DMEA has historically been DACH-focused, but in recent years is becoming Europe’s largest cross-continent digital health show. Vendors positioning themselves as able to deliver the IT required to secure contracts in countries where funding has been ramped up, will be a key feature of the show.   

Vendor Consolidation – Local Champions to Regional Heavyweights 

More than 500 vendors, from international heavyweights to start-ups, will exhibit at DMEA, a sign of a healthy, competitive ecosystem of IT and device companies addressing the European healthcare technology market. However, the backdrop to this is the recent emergence of several pan-European heavyweights, specifically in relation to hospital IT.  

CGM has, for many years, been relatively large, serving many European (and global) geographies; however, 2021 saw it breach the €1Bn threshold for the first time, and €1.1B in 2022. It has grown partly organically but also via ambitious acquisitions, most recently of Medicus, VISUS, New Line and eMDs. Its 2020 acquisition of several product lines from Cerner (now Oracle Cerner) also significantly boosted its hospital business.    

Dedalus has also rapidly expanded its business and footprint. As well as being the DACH region’s dominant vendor, it also enjoys tier 1 status in Italy, France and the UK, often in both inpatient and outpatient/primary care markets. This has largely been achieved via acquisitions.  

Many of Europe’s once single-country-focused vendors, such as TietoEVRY, Mesalvo (the merger of iSolutions and Meona), Cegedim and Cambio have attempted to scale internationally, sometimes organically, but more often via M&A. Further, the two dominant US inpatient health IT vendors, Oracle Cerner and Epic, now also hold a substantial presence across Europe.  

A key debating point at DMEA is whether Europe is heading in the same direction as North America, where most large digital health IT contracts (particularly inpatient EHR/HIS) are mopped up by a small number of incumbent vendors with the scale and resources to address increasingly demanding tender requirements.  

Signify Research’s view is that this will not happen. There will be increased consolidation, benefitting the likes of CGM, Dedalus and Epic, but at a slow pace. However, the specific geographic nuances of each country, the fact that European EHR and Clinician Information System (CIS) markets are still relatively independent, and the entrenched position of many leading local vendors (think Maincare (France), SystemC (the UK), Ines (Switzerland), Engineering (Italy)) will result in a healthy, and relatively fragmented, competitive ecosystem for the foreseeable future. The plethora of vendors that have already benefited from KHZG funding adds weight to this argument.  

New Models of Care Leveraging Integrated Data 

“New perspectives on health data use and analysis”, one of the key themes on the DMEA congress agenda, underlines the drive to develop connected healthcare ecosystems in many European countries. This has been a focus of German healthcare IT investment over recent years in the form of Gematik Telematikinfrastruktur (TI), a programme to connect the multitude of IT systems used across the healthcare network.  

However, whilst successful IT-wise, the programme has not ultimately changed how healthcare is organised and provided across Germany. There are examples in other European countries where data connection/integration programmes were a component of a broader reorganisation of healthcare towards a more integrated, holistic, predictive (as opposed to reactive) system. These include the creation of Integrated Care Systems in the UK, and Territorial Professional Health Communities (CPTS) and GHTs in France. To some extent these programmes mirrored US Value-Based Care/ACO programmes, although all have been slow to deliver on their promise.  

A key theme at DMEA will be how to accelerate the integrated care agenda across Europe, which models offer the best opportunity to tackle the increasing burden of healthcare provision across the region and, specifically, how this is implemented in DMEA’s home territories of Germany, Austria and Switzerland.   

Scaling Digital Therapeutics and Remote Patient Monitoring 

In November 2019 the German Bundesministerium für Gesundheit (Federal Ministry for Health) launched, with great fanfare, the Digital Healthcare Act (DVG).  Core to this was €200M($240M) annual funding to 2024 for Digitalen Gesundheitsanwendungen (DiGA) apps. These were digital apps prescribed by healthcare providers to support the management of a range of medical conditions from depression, panic attacks, obesity, anxiety, and osteoarthritis. Solutions could range from patient-focused decision support software, apps to manage medication dosage or solutions to monitor and collect data on patients related to therapy or condition. 

The launch was initially plagued by challenges, from delays in testing and authorising solutions on the official DiGa app register, to a lack of engagement from physicians in prescribing solutions to patients. In subsequent years, there has been some progress, but the programme is still far from delivering on the original fanfare.   

The DiGa experience is representative of many digital therapeutics and remote patient monitoring (RPM) programmes across the continent. For many countries, including Germany, making the step from small, regional trials tied to specific pilot programmes to scaled solutions addressing large sections of the population managing chronic conditions and mental illness remains an unmet challenge. Patients managing chronic conditions and mental illnesses are some of the most expensive cohorts in terms of healthcare provision. Grasping the opportunity that digital health offers to limit these costs must be prioritised.   

Europe has, largely, still not passed the latency inflection point in the product life cycle for both digital therapeutics and RPM, unlike the US which is now clearly growing owing to clearer funding mechanisms and a more holistic spending viewpoint via VBC. Much discussion at DMEA will relate to what is needed to move the dial on this topic across Europe.   

DMEA’s coverage will be broad, and these themes represent what we believe will the leading topics. A range of other issues will be addressed, from cloud migration, virtual care post-COVID, to the increasing influence of big tech in Europe’s health IT markets. In general Europe has lagged the US in healthcare digitisation. DMEA will be a bellwether as to whether the post-COVID influx of IT funding is narrowing this gap.  

Signify Premium Insight: Ripples but no Splash for CompuGroup Medical’s Medicus Deal

CompuGroup Medical (CGM) returned to the Laboratory Information Systems (LIS) acquisition trail last month, bringing US lab management software vendor Medicus into its corporate portfolio. The deal solidifies CGM’s position as the largest LIS software provider to physician office labs and reference labs in the US.

While on the face of it this is a decent situation for CGM, the acquisition will deliver little revenue upside. It will also have little impact on the wider battle playing out between LISs implemented as part of a broader EHR rollout (EHR-LIS), and deals around independent best of breed (BoB)-LIS vendors.  

The Signify View 

Medicus is an established brand in physician office labs and reference labs in the US, with an installed base of around 4,000 labs across the country. No company has a bigger footprint in small and medium-sized labs, and CGM sees the deal as an opportunity to sell its technology and revenue cycle management solutions and services to these labs. It claims these solutions and services will help the labs in what it describes as a ‘difficult’ US market (more on that later). 

But CGM-Medicus growth potential in this market is constrained. Physician office labs and reference labs are little more than ancillary players compared to hospital labs (the drivers of diagnostic testing). LIS vendors selling into these labs cannot command anything like the fees vendors can charge hospital labs. Consequently, CGM will not generate big revenues from 4,000 or so relatively small labs, which account for just 8% of total test volume in the US. 

EHR-LIS v BoB-LIS: a Tale of Two Regions  

CGM’s Medicus acquisition takes place against a backdrop of a steady encroachment of EHR-LIS implementations at the expense of BoB-LIS in the US.  

We describe this trend in this Insight published last May, where we note how EHR giants Epic and Oracle Cerner are aggressively winning over cost-conscious hospitals in the US. There are clear advantages to providers in adopting EHR-LIS. EHR vendors can effectively offer LIS software as a loss leader if it means they can sell profitable EHR solutions to the provider as well. This approach also simplifies the hospital IT supply chain, and as a result hospitals are increasingly consolidating their IT procurement around a single vendor.  

This is most pronounced in the US, where Epic and Oracle Cerner are cornering the market, and where BoB vendors are being squeezed out. CliniSys is one such vendor which has seen its US market share eroded in this way. Overall, the proportion of the market comprised of BoB-LIS vendors is shrinking (see graph below), and will shrink further. BoB vendors which offer something novel, or which have the resources to invest in product R&D, might survive, but it is otherwise the US is a hostile place for most BoB vendors. 

We argue in the aforementioned Insight that total dominance of EHR-LIS implementations is no foregone conclusion in other markets. Compared with BoB-LIS, EHR-LIS implementations can suffer from a loss of workflow and lab type specialisation. While the US is a difficult market for the reasons we state earlier, the prospects for BoB-LIS are much brighter in Western Europe (in particular the UK, the Netherlands and the Nordics). Furthermore, demand for well-equipped labs, and greater accessibility and interoperability of data has intensified over the last two years, and will drive accelerated investment in most regions (outside the US) in the medium-term. Finally, Covid underscored the continued need for top-tier workflows to remain within the healthcare lab. This is another reason why we believe BoB-LIS will fend off some competition from EHR-LIS. 

Given the above, the CGM acquisition is good news for Medicus, and might just be its perfect exit route from a hostile US market. 

Measured Approach

In contrast to Epic and Oracle Cerner’s thunderous invasions into EHR-LIS in the US, CGM’s recent acquisitive forays into LIS are more measured. The Medicus deal creates barely a ripple on the EHR v BoB battlefield. CGM’s December 2020 purchase of SchuyLab – which like Medicus is focused on physician office labs and reference labs – and its February 2022 acquisition of anatomical pathology LIS provider AP Easy, have had little influence on wider trends. But despite this, CGM’s LIS portfolio – which includes LABDAQ, considered the leading LIS in the US, and MOLIS – is undeniably healthy. 

Despite our muted view of the Medicus deal and CGM’s ability to influence the EHR-LIS v BoB-LIS battle, there are market opportunities for its LIS portfolio companies. For example, in the US demand exists for point-of-care testing services, given the preference for individuals there, for cost purposes, to visit a lab, rather than a physician, to be tested. But even here demand has cooled from the post-Covid peak, when LIS vendors also witnessed rising demand for integrations, and when vendors who had structured pricing around annual testing volumes also benefitted.  

Given the above, in our aforementioned Insight we propose a number of different ways LIS vendors could grow and prevent customer attrition. One is to acquire the competition (as Dedalus has done); another is to diversify their portfolios into wider lab software (there are many opportunities here, with the most common being genetics-based LIS software or ‘patient engagement’ add-ons); a third is to ally with another product sector; or finally to diversify out of healthcare. In CGM’s case, we cannot see it acquiring another large LIS vendor in the same way that Dedalus has.  

A more viable route for CGM might be a pivot to targeting hospital labs. That would be quite some statement of intent, and would pit CGM against Epic and Oracle Cerner. But, again, it is hard to envisage this happening at this juncture. Any acquisition would need to be sufficiently integrated to compete, and this would take time to develop and scale. 

Growth by Acquisition 

While several EHR vendors, including Epic and Intersystems, have chosen to develop LIS capability in house, CGM’s strategy of acquisition is more common. Oracle Cerner and Dedalus have both acquired LIS companies on a scale far larger and more ambitious than that of CGM. Dedalus has bought more than 20 different companies (mostly hospital and pathology labs) in a relatively short period. This is a potentially quick path to growth, but is risky. Problems in integrating the acquired companies’ products can upset customers, who might leave established vendors. 

Limited Traction 

Unless CGM’s plan is to move into traditional laboratory information management systems (LIMS) across multiple industries – as CliniSys did with its acquisition of Horizon Lab Systems and ApolloLIMS – the Medicus deal should be viewed simply as another small milestone in its LIS portfolio evolution. It is not a game changing development which will hasten the dominance of EHR-LIS implementations over BoB-LIS. 

Despite this, in the wider scheme of things, CGM is evolving nicely. It is developing a great all-encompassing portfolio across the hospital and outpatient care markets, and is ambitious enough to be doing so on a global scale. In terms of its strategy, there are parallels with Dedalus, with an array of discrete solutions covering different applications and geographies. If CGM can, over time, bring this together into a more coherent, joined up portfolio, it will be in a strong position. 

Signify Premium Insight: The Buyers Looking to do a Deal for Dedalus

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Private equity investor Ardian is reportedly weighing the sale of Dedalus, in a deal that could value Europe’s largest Electronic Health Record (EHR) vendor at $3.3bn.

While reports remain unconfirmed, financial investors and strategic bidders alike could be interested in the Italian software company, with both its health records and imaging IT activities offering tantalising possibilities.

Such a sale represents an unexpected change in strategy for Ardian given Dedalus’ recent acquisitive appetite. The vendor has, after all, acquired numerous businesses since being bought by Ardian in 2016, with AGFA’s HCIS business, predominantly driven by its Orbis product line, which included a proportion of that vendor’s imaging IT segment, DXC’s EHR Business, Swiftqueue, GSG and Dobco Medical Systems among others. Such a spate of acquisitions has left Dedalus with a full, if not yet fully integrated, portfolio, offering any prospective owner a heady mix of opportunity and challenge alike.

While some speculators will focus solely on Dedalus as an EHR vendor, this is a mistake, given that, as this Premium Insight highlights, the company’s imaging business also brings a considerable amount of intrigue to the deal.

The Signify View

The European EHR market is, in a word, messy. Dedalus’ acquisitions mean that the vendor can lay claim to the largest share of this fragmented market, but it has also left the vendor with a bristling portfolio of brands, many of which hold only very localised potential and were primarily acquired to access their customers. There are, however, some brands that have broader bases, such as AGFA’s Orbis business, which was purchased in 2019, and brought strength across France, Austria, Switzerland and, in particular, Germany. In addition to greater international reach, the AGFA purchase also included that brand’s imaging IT, IMPAX products, which are closely tied to its EHR tools in select markets such as the DACH region. This inclusion brought with it more customers and the opportunity to sell its freshly acquired imaging IT capability to its extensive EHR customer base.

By taking AGFA’s legacy imaging IT tools, which were, at that company at least, being superseded, revitalising it as an enterprise imaging solution, with the prospect to integrate other capability such as Dedalus’ digital pathology tools, the Italian software firm has the potential to offer a well-rounded and competitive imaging IT platform. Integration between these disparate aspects are not yet problematic for the vendor, as the adoption of a multi-ology enterprise imaging strategy has been slow in many of Dedalus’ key markets. Further, despite the fact this imaging IT portfolio is not yet as sophisticated as some alternatives on the market, its large European installed base, the upcoming tranche of sizable imaging IT contracts up for renewal, and procurement rationalisation across the region means it constitutes a lucrative aspect of a deal predominantly based around EHR.

Dedalus is the market leader in the EMEA region, but there is a very long tail of vendors which have carved out their own corner of this fragmented market

The Delivery of Digital

This in itself is also likely to be beneficial. In some European markets such as Italy, Germany and France, there has recently been increasing impetus and investment to drive digitisation (e.g. the German Hospital Futures act (KHZG), Le programme HOP’EN in France and Gara Sanità digitale in Italy). These initiatives will be primarily focused on the transition to a more coherent, consolidated approach to medical records. However, as this area enjoys substantial investment for digitisation, it is likely to act as a precursor to further e modernisation in other areas, such as enterprise imaging. This will allow Dedalus to utilise its hospital installed base to increasingly promote its enterprise imaging offerings and capitalise on this transition across the business.

Such opportunity in the very near future begs the question of why Ardian is looking to free itself of Dedalus, a particularly pertinent question given that it only acquired the firm six years ago and has been undertaking acquisitions under the Dedalus name as recently as March 2022. In fact, in the last seven months alone, Dedalus has made four acquisitions: Dobco medical, ix.mid, Swiftqueue Technologies and GSG.

Despite the ongoing investment in the company, and the opportunity Dedalus affords, the decision to sell from Ardian does make sense, given that, at a $3.3bn valuation, a sale still represents a sizable return for its private backer. This is, in part, a result of timing.

The Importance of Punctuality

Given the present opportunities in the EHR and imaging IT markets in parts of Europe, Ardian is selling a broadly capable business which legitimately offers very strong growth prospects. If the private equity firm was to continue to hold the company and invest further effort and resource into the continued development of its portfolio, these shorter-term growth opportunities for a buyer, would be missed. This is particularly true given the ‘stickiness’ of many of the areas in which Dedalus has capability, aside from EHR and imaging IT, which offer longer term returns such as digital pathology, precision medicine, pharmaceutical partnerships, and the broader data play. These areas are nascent, but as they grow could return significant and reliable revenues

Timing has also been important. As illustrated in our Electronic Medical Records and Imaging IT market intelligence services, both the EHR and imaging IT markets across Europe are mature and cost-competitive, but the funding being injected to aid recovery from the pandemic, digitalise healthcare as well as pent up demand, makes 2022-2025 atypical growth years.

The pandemic has also helped ensure that some potential buyers have the cash at their disposal to complete such an acquisition.

Who Wants It?

There are, after all, a number of different parties that could see possibilities stemming from the acquisition of the vendor. One of Dedalus’ chief European competitors, such as CompuGroup Medical, for example could entertain visions of more than trebling its EMEA market share at the stroke of a pen, it was after all reportedly eying up Agfa’s (now Dedalus’) hospital IT business several times in the past. Large international health vendors such as Siemens Healthineers or Philips might consider such a deal an opportunity to further expand their reach and increase their penetration at providers. Broader enterprise software providers such as Citadel group could eye the sale of Dedalus as an unmissable opportunity to aggressively stake a claim on the European health tech market.

While these are all possibilities, there are significant barriers that make them unlikely. A rival EHR vendor would, in all likelihood, be dogged by anti-competitive legislation, while the acquisition of a company as diffuse as Dedalus would only cause product rationalisation headaches for any equally sprawling competitor such as CompuGroup. A large international healthcare vendor may have the cash to seal a deal, but significant overlap in capability and challenges in integration make such a move unlikely. In fact, candidate health tech vendors such as GE and Siemens have moved in the opposite direction and off-loaded their EHR businesses over the last seven years. For other companies simply looking to increase their presence in the market meanwhile, the acquisition looks risky, in all probability rendering it unpalatable for all but the most committed.

Other People’s Money

Instead, by far the most likely acquisitor is another private equity firm. At a time when global geopolitical circumstances make healthcare appear a relatively safe haven for investors, a vendor with broad capabilities across a number of European markets represents a very attractive option.

A private equity firm would be able to take the bundle of brands that Ardian has assembled and undertake a comprehensive streamlining process to ensure all the newly acquired companies can form a complementary whole. What’s more, while undertaking this process of making the vendor more operationally efficient and driving margin expansion, and ensuring that Dedalus can capitalise on the ongoing digitalisation efforts in Germany and elsewhere, a new private equity owner can look to enjoy sizable and consistent revenues. While there is a drive towards digitalisation, and in imaging there are significant shifts toward joined up enterprise imaging solutions that expand far beyond radiology, these will not impact the market for several years, offering a new owner relatively stable returns for the immediate future. Given Dedalus can also lay claim to capability in numerous growing areas, from digital pathology to real world evidence courtesy of its GSG purchase and cloud-based informatics stemming from its Dobco deal, the Italian vendor also harbours significant potential for riding future waves of growth should an investor want to commit for the long hall.

The sale of Dedalus is far from a foregone conclusion. Reports have suggested that talks are in the early stages and may not lead to a deal, suggesting that Ardian is well prepared to pass if a potential buyer cannot come up with a bid that recognises Dedalus’ value. However, the last two months has seen a flurry of activity from would-be investors and now is the opportune moment for a deal to be done. Ardian can realise healthy returns and a private equity investor has the chance to ride a rising tide. A messy market or not, this is a deal for which there will be plenty of interest.

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