Cerner to Purchase Health IT Siemens for $1.3 Billion

Healthcare Global recently discussed the rise of healthcare IT M&A, and following along with that trend, Cerner announced on July 5 that it will be purchasing the German industrial conglomerate Siemens for $1.3 billion.

The deal will increase the provider of electronic health records’ annual revenue from approximately $3 billion last year to more than $4.5 billion of annual revenue this year, reported Forbes. The merger will lead to 20,000 associates in more than 30 countries and 18,000 facilities will be clients.

“We think scale is important,” Neil Patterson, who founded Cerner in 1979, told Forbes in a recent interview. “We were the largest IT company, but this gets us a bigger, better business platform. We’ll have a combined $650 million [in research and development] spend and we think the future of healthcare computing is driven around the ability to innovate. This kind of preserves our ability to spend heavily in innovation and IT certainly for the rest of this decade.”

The sale was rumored earlier in July with Natalia Mamaeva, an analyst at Citigroup Inc., stating that the key focus for the company was not the cash generation via disposals, but rather the clear-out of the peripheral assets.

Combined with Siemens' health IT unit, Cerner expects research and development expenditures to be about $650 annually.

Cerner and Siemens will create a strategic alliance to jointly invest in innovative projects that integrate health IT with medical technologies for the purpose of enhancing workflows and improving clinical outcomes. Each company will contribute up to $50 million to fund projects of shared importance to both companies and their clients.

The alliance has a three-year initial term. Advanced workflows along with medical images and their unique role in diagnostic and therapeutic decision-making, will be an early focus of the joint work.

“We realized that business success of our hospital information systems could not always keep up with our competition,” Hermann Requardt, head of Siemen’s healthcare operations, said in a news release. “An increasing number of country-specific requirements, such as resulting from US healthcare reform, make it increasingly challenging to achieve sufficient scale effects.”

“We believe this is an all-win situation for the clients of both organizations and all of our associates and shareholders,” added Patterson.