Medtech, whose major asset is New Zealand’s dominant GP and specialist patient management system, is up for sale, despite a depressed environment for software vendors.
New Zealand’s dominant patient management software vendor, Medtech, has been put up for sale by its private equity owners Advent Partners.
The sale, according to the Australian Financial Review, would represent the largest sale of an electronic health record vendor since Telstra Health acquired MedicalDirector in Australia in 2021 for $350 million, a figure which represented over five times the reported revenue of the group at the time, over 15 times the earnings.
The AFR reported that Medtech has earnings of $15 million, however, that figure is likely to be diluted depending on how much the group has been capitalising what are likely significant software development costs, as it races to build out cloud functionality to compete with emerging cloud startup competitor Indici.
That figure could be as much as $5 million per annum dragging the actual earnings figure back as far as $10 million.
Medtech’s practice management software has virtually no share in the Australian market but it has recently launched a product called Artia in New Zealand and Australia which it describes as “a complete clinical and medical administration application that can be used in general practices, hospital emergency departments, specialists and government departments”.
It is unlikely that this product, being so new, will gain much share in either country yet or revenue.
Medtech was founded in 1989 some years before MedicalDirector in Australia so it might lay claim to being the first end-to-end medical administration software platform used by general practices and specialists in Australasia, however, despite a few attempts at bringing the product over the ditch, it never really took off in Australia.
The business was acquired from its founder in June 2020 by Advent via the group’s Advent Partners 2 Fund. Christchurch-based Acclivis Group invested at the same time.
Depending on who you talk to that deal was worth somewhere between nothing and NZ$40 million – some say the business was sold for virtually nothing because it was near administration at the time.
Market sources say that based on the current earning and market conditions Advent will be looking for a price north of NZ$75 million, which might represent just under twice revenue and 7.5 times earnings. Both multiples represent significant drops to what Telstra Health paid for MedicalDirector only three and half years ago.
When Telstra Health bought MedicalDirector, it was the equal or dominant shareholder of GP desktops in Australia with about 45-50% of the market. Medtech has a lot more share of the New Zealand market than that as a long-term incumbent.
In medical software, share and incumbency usually represent a lot of value to longer-term investors, and Medtech has both.
But what buyers might also take into account over a generally depressed environment of software vendor value post covid in assessing value is just how much legacy remains in the Medtech product compared to its all-cloud startup competitor Indici.
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In Australia MedicalDirector’s share plummeted after its acquisition from about 45% to something like 25% with aggressive competition from the other major market player Best Practice.
Whether Medtech was close to closing at the time of it changing hands five years ago or not, it appears to have significantly grown both revenues and earnings in the intervening period under general manager Geoff Sayer, who was previously a senior manager at marketing leading secure messaging provider Healthlink, Telstra Health Toniq and Clanwilliam.
The AFR reported that the deal comes on the back of “healthy” inbound interest and that indicative bids are due before Christmas.
