The Sage Group plc (“Sage”) is to acquire Emdeon Practice Services, Inc. (“EPS”), based in the US in Tampa, Florida, from its parent company Emdeon Corporation, for an enterprise value of approximately £297 million*, to be paid in cash and financed through Sage’s existing credit facilities. The acquisition is expected to complete in September, subject to regulatory approvals.

EPS revenue for the year ended 31 December 2005 was approximately £160.3 million* (2004: £155.8 million*). Earnings before interest, tax, depreciation and amortisation were approximately £11.4 million*^ (2004: £3.7 million*^). EPS had gross assets of approximately £37 million* as at 31 December 2005.

With 20,000 customers, EPS is a leading vendor of software and services for doctors' practices in the US, most of which are small or medium-sized businesses. EPS software is used in practice management and in the maintenance of patient data. This includes administrative and financial processes such as appointment scheduling, prescriptions and billing, together with the creation and management of electronic health records. EPS support services include software maintenance and, additionally, access to electronic medical transaction services such as those facilitating claims to healthcare insurers.

The market for doctors' practice management software has potential for significant expansion. There are over 200,000 doctors' practices in the US and many are seeking to automate their businesses, in order both to increase efficiency and to ensure compliance with regulations governing electronic health records, healthcare insurance claims and medical care documentation. Users of practice management software exhibit high demand for support services.

Revenue growth is expected to result from increasing use of software to automate doctors' practices, from higher adoption of electronic health records software compared with the current low levels of adoption and from the extension of support and network services. Sage's expertise will be used to improve sales and marketing of additional products to EPS customers and to maximise retention and productivity in customer support operations.

Additional revenue opportunities will arise from cross-selling of Sage accounts software to EPS customers and vice-versa, facilitated by progressive integration between accounting and practice management. Customer research on the 7,000 doctors' practices in Sage's US customer base has shown a clear demand for practice management software and for its integration with accounting software. There are also opportunities to raise operating margins through the application of Sage's customer base marketing and support expertise, and through administrative synergies.

Paul Walker, Sage Chief Executive, commented, "Acquiring Emdeon Practice Services enables Sage to market its products and services to a substantial new community of small and medium-sized businesses in the US. This market is showing clear demand for automation of business processes. This acquisition continues our strategy of providing industry-specific solutions, by bringing dedicated Sage solutions to this business sector for the first time.

The growing doctors' practices market provides opportunities to offer an integrated Sage solution to both new and existing Sage customers in the US, covering accounting, health records and practice management. Emdeon Practice Services will now form the basis for a new doctors' practices division, which we aim to grow both organically and through further acquisitions."

Sourced From: ConnectComm