Symphony buys McKesson UK health ops

Private equity firm Symphony Technology Group is to acquire most of the European healthcare software business of McKesson Corporation.

STG will buy McKesson operations, including the UK health and social care businesses, covering System C and Liquidlogic, plus McKesson’s software operations in France and the Netherlands. 

The Palo Alto, California, based private equity firm says it expects to complete the acquisitions in late June early July.  The price and terms of the deal were not disclosed.

McKesson Workforce, which provides the NHS Electronic Staff Record, is not included in the deal and will remain part of McKesson International Operations Group. The subsidiary has now withdrawn from the re-tender of ESR.  

McKesson had previously said its PACS business will not be covered.  The UK counts for about 50% of the revenues of the businesses being sold.

STG specialises in developing technology businesses in enterprise and business-to-business markets.   It has over $2 billion in investments across a portfolio of 14 global companies.

It says it plans to operate the acquired businesses as independent companies, and that it intends to support the continued expansion of each “both by creating new, innovative products and through selective acquisitions.”

In addition it “will leverage, where appropriate, insights and capabilities from other STG portfolio companies serving the healthcare market.”

STG managing director Marshall Haines told EHI: “Our macro view is that healthcare systems are under stress. Governments need to do more with less and information technology can help improve sustainability.”

STG’s current healthcare portfolio includes Symphony Health Solutions, a provider of high-value data, analytics and software tools for healthcare and life sciences companies, and Evidera, an international health research and consulting company.

Haines added that, in the UK, STG is buying “a very state-of-the-art solution set in Medway [the software suite developed by System C], with over 19-customers, and Liquidlogic [a social care specialist], with over 50 customers.”

He said this placed the firm in a great position to help deliver the UK government’s vision of integrated digital care records and care pathways, crossing health and social care. 

He said the UK market offered significant opportunity.  “You have a unique situation here with the ending of NPfIT and trusts buying locally.”

Asked about how STG would adjust to the NHS and UK healthcare system, he added: “We approach this market with humility. We’ve a lot to learn, but what we do bring is some entrepreneurial firepower and real knowledge of how to build great technology businesses.”

Haines said that developments would focus on areas that can deliver early benefits to customers and highlighted mobile as a priority. 

“Many players in this market are very, very large companies. We’ve found that we can be successful by being a little smaller, staying close to customers, and developing products much quicker.”

“We are pleased to have found a new owner in STG, which is an experienced and long-term investor,” said Lord Carter, chairman, McKesson International Operations Group.

“Moreover, we have been impressed by STG’s deep understanding of the healthcare market and we believe this will enable these businesses to continue to deliver great value to the customers they serve.”

Asked what success would look like for STG, Haines said: “I’d define success as an outcome of making customers happy.  Our view is that if you do that you will get good returns for investors.”

McKesson first announced its intention to sell its International Operations Group subsidiaries, including McKesson UK, in May 2013. 

The decision to sell came just two years after the firm paid £87m for UK clinical software and implementation specialist System C.

McKesson remains the third biggest supplier of hospital patient administration and electronic record systems to the NHS, behind CSC and Cerner, as a result of its legacy PAS systems and winning new business through System C.

Almost all NHS trusts use the ESR HR and payroll system. But industry sources have indicated that uncertainty over the future of ESR has been a key factor in delaying sale of McKesson’s International Operations Group.

In a statement issued at the weekend, McKesson said: “The business workforce is not part of the divested entity and continues to operate as part of McKesson’s International Operations Group today and for the foreseeable future.”

The statement continued: “McKesson has confirmed withdrawal of its interest in the re-bid of the Electronic Staff Record contract.”