ResMed gets 'one-two punch' with Brightree

SAN DIEGO - Some may think the price tag too high and the pairing unexpected, but ResMed officials say the company's plan to acquire Atlanta-based Brightree makes all the sense in the world.

ResMed announced Feb. 22 that it plans to buy Brightree, a provider of cloud-based business management and clinical software applications to HME companies and home health and hospice agencies, for $800 million, in a cash deal representing a multiple of 18.8x EBITDA, or 13.5x EBITDA with a planned tax benefit of $300 million.

ResMed CEO Mick Farrell cited the going rate of healthcare IT companies and the immediate accretive addition of Brightree's $113 million in revenues and $43 million in EBITDA to gross margins and earnings per share, as reasons why the price tag is a fair one. 

“I respectfully disagree,” said Mick Farrell, CEO of ResMed, during a conference call when one investor called the price tag “lofty.” “Actually, it's a really solid financial deal.”

Brightree, formerly a portfolio company of the venture capital firm Battery Ventures, will continue to operate as a separate entity and will be managed independently from its headquarters in Atlanta. ResMed expects the company's employees, including President and CEO Dave Cormack, to stay onboard.

Farrell described the deal as a “one-two punch.” It will allow ResMed to build on existing tools like U-Sleep and CareTouch (rebranded ResMed ReSupply) to increase the efficiency and improve the cash flow of its HME provider customers. It will also give the company access to two new market segments—home health and hospice agencies—that could potentially refer patients back into its diagnostic and therapeutic channels of pulmonologists, sleep doctors and HME providers.

“There's a huge opportunity in areas such as COPD, where patients may be in home health or hospice, to identify patients and pull them back in,” he said.

ResMed officials say Brightree also builds on the company's growing cache of connected care solutions. For example, data from ResMed's connected vent devices could be fed into Brightree's point-of-care app to help home health agencies “get ahead” of treatment issues.

“We see the opportunity to collaborate on the engineering side on intersecting our connected care technologies with their platform,” said Raj Sodhi, president of the Healthcare Informatics Global Business Unit at ResMed.

While ResMed officials dodged questions about Brightree's marketshare, they boasted its 80%-plus recurring revenue in 2015 and described it as a leader with room for growth, in terms of adding new customers, adding new users from existing customers, and adding new users for services above and beyond its billing services.

“We see growth in all three,” said Jim Hollingshead, president, Americas.

ResMed and Brightree have been working together since 2013, when the two companies signed an electronic data exchange agreement to help joint customers streamline their business processes. That paved the way to integrate ResMed's U-Sleep solution and its AirView patient management system with Brightree's solution.

Brightree marks the third acquisition for ResMed within a one-year span. It completed its acquisition of Inova Technologies this February, making it a player in the home oxygen therapy market, and it bought CareTouch in July.