Harris Williams recently advised TractManager, a portfolio company of Arsenal Capital Partners, on its sale to symplr, a portfolio company of Clearlake Capital Group. TractManager is a leader in the HCIT sector, providing solutions across strategic sourcing, contract lifecycle, and provider management. Here, we discuss what makes the operational software segment of HCIT appealing for buyers, the factors differentiating TractManager from other companies, and our advice for buyers active in the segment.
Why is this an appealing space?
Hendler: For the past 15 years, healthcare technology investment has been focused on financial and clinical software tools to help optimize clinical efficacy and improve outcomes. The space in between – namely the tools that help govern the day-to-day operations of the hospital – has been a blind spot. We believe that the next wave of healthcare technology spending will be focused on solutions that improve operational efficiency. As healthcare provider organizations have consolidated, most have not focused on eliminating redundancies along the way. Now, there's an opportunity for them to take advantage of their economies of scale and reduce cost, and they're seeking tools to bring insight and more efficient management to these areas. The surge in demand for hospital-based care during the first wave of COVID-19 also demonstrated critical fractures in the core operations of care delivery, further underscoring the urgent need for these solutions. As the U.S. healthcare system moves toward value-based care, the pressure to find operational efficiencies and protect operating margins intensifies, which is a call to action to optimize operations.
Linsalata: There's also growth opportunity for operational software companies in expanding the services surrounding their software. Operational technology solutions inherently generate a lot of data and insights, but the software can't act on those insights for you. Most provider organizations don't have the staff to analyze the insights generated by operational software tools. In the future, you will see more and more professional services wrapped around software solutions, with subject matter experts helping their customers gain even more value from the solutions that they're using.
What made this an especially attractive company?
Linsalata: The sheer breadth and depth of TractManager's customer relationships are differentiating. Across its solution suite, the company touches more than 60 percent of U.S. hospitals. The company also has a suite of solutions that provide both a longer-term strategic approach to optimizing cost structure and an immediate opportunity to quickly deliver a very high return on investment with little disruption to the organization. Symplr and TractManager have a similar solution-selling approach, and both are committed to creating high-value relationships with clients, so it was a great fit.
Hendler: The core of TractManager's solution is a contract lifecycle management software platform that was built specifically for healthcare. The broader TractManager offering was built very deliberately through strategic M&A. The company has acquired best-of-breed solutions that could leverage the information that is inherent in a hospital system's employment and vendor contracts. Each acquired solution amplifies the power of the others and the whole. By acquiring TractManager, symplr could build a more comprehensive platform and enhance the value proposition of its full product suite.
What should other prospective buyers know about this subsector?
Linsalata: Operational software is a burgeoning space within HCIT. There are several platforms looking to aggressively and rapidly consolidate the space as they work to build scale. Scale matters here. As healthcare companies consolidate, it will become a strategic imperative for them to rationalize their vendor landscape, and bigger entities will win when this occurs.
Hendler: Looking toward the future, we believe platforms will need to expand beyond operational software. At some point, the winners in this market will be the ones who can fully integrate clinical information, operational considerations, and compliance overviews to put the right clinician with the right patient at the right time to drive higher-quality care at lower cost.
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Published January 2021