Case Study - Strategy & Corporate Development

Objective

 Innovaccer has approaching maturity in the population healthcare management market and is looking for
inorganic avenues to unlock the next phase of growth. To this end, it needs to diversify in the related areas

Acquirer: Innovaccer

Market:

 Innovaccer is a part of the healthcare information technology industry, which is expected to grow at a CAGR
of 28% from 2023 to 2030, reaching $63B by 2030.
 This trend is driven by increased digitization in the segment, need for improved data-driven decision making
and focus on value based care
 Highly competitive with big players such as IBM, Cerner, Oracle, Health Catalyst; However, Innovaccer
differentiates by providing population healthcare management solutions, seamless data integration, and
cloud based solutions that is easy to implement and use

Acquirer:

 Innovaccer is a healthcare technology company, focused on using integrated data and analytics to provide
improved efficiency and effectiveness of healthcare in the US.
 Through data integration, analytics, and tools, it integrates healthcare data from claims, EHRs, wearables,
labs etc. and makes it useable and insightful makes healthcare information accessible and useful for HCOs,
providers and payers.
 The primary benefits of the tools provided by Innovaccer are –
o Enhance population health by reducing costs and readmissions for HCOs by helping them understand
patients better
o Provide patient centric care by using data to provide targeted care interventions
o Close gaps at the point of care by intimating the providers on the patients’ medical history, profile,
medications, provider network etc.
o Improve patient experience

Customers:

 The company currently runs on a subscription based business model – charges HCOs and providers a
recurring fee to avail its tools and services.
o Innovaccer currently has records of 39M patients, across 96,000 providers over 1600 locations/HCOs.
Innovaccer’s current revenue stands at ~$100M.

Analyzing Target

Industry Analysis

 The healthcare CRM industry is growing rapidly (expected to reach $38B by 2028), driven by rising patient
engagement demands, need for improved data management, and increased adoption of value-based care
 The industry faces challenges such as data integration and interoperability complexities, security and
compliance to HIPAA
 Big players such as Salesforce HealthCloud, Oracle, Cerner CRM and niche players such as Wellcentius and
Healthgrades

Target
A US-based company operating in the healthcare customer relationship management (CRM) category to acquire
under Innovaccer’s broader CRM category.

Target’s Background

 The company provides software for patient outreach, engagement and retention
o This enables HCOs and providers engage with customers better, improve retention and improve
patient experience
 It has historically provided services but is now moving to more software based offerings
 It was started in 2018 by 3 seasoned co-founders out of EPIC and Salesforce
 It has ~25 employees, all are based out of the US

From Financial modelling

 The target’s revenue in 2023 was $xx with a standalone growth rate of $yy, expected to hit $zz in 2025
 The market is $kk in 2025
 It will burn ~$2.5mn this year and is expected to breakeven by 2025 on a standalone basis

Customers:

 It primarily serves health systems in the US which is also the same target segment for Innovaccer

Financial Assessment

 Valuation: Understanding the progress made by the target in its journey from a service-based to a software-
based CRM solution provider, the valuation of the company needs to be determined
o Valuation will also be based on comparable company analysis, cash flow and the financial statement
 Due Diligence: Assess the target’s financials, including historical performance, revenue, expenses, and
projected growth.
 Breakeven Analysis: Evaluate the target’s breakeven timeline (expected to breakeven by 2025).

Synergies

The target serves the same health systems segment as Innovaccer; This ensures that the target directly addresses
Innovaccer’s existing customer base and needs to grow in the same market by acquiring a large share

Revenue Synergies

 Grow CRM revenue: Capture share of Target’s revenue and customers. Reduced barrier to entry into the
CRM market, while leveraging Innovaccer’s tech stack, data and analytics to extend better CRM offerings
 Cross-selling: Enable comprehensive healthcare capabilities to the existing by integrating improved CRM
capabilities and providing end-to-end solutions, empowering HCOs to engage and retain patients
 Capture more market-share: With a improved end-to-end healthcare management offering, Innovaccer can
acquire set of customers (with a requirement for a holistic solution) beyond their combined customer groups.

Technological & Strategic Synergies

 Innovation: Consolidation can accelerate innovation by synergizing R&D in the same segment
 Richer data: Access to richer patient and HCO/providers data, thus unlocking the ability to provide holistic
care by integrating population healthcare management and CRM solutions
 Single-shop: Consolidate Innovaccer’s offerings as a single-shop healthcare tech provider and gain
unattainable market share

Cost Synergies

 Infrastructure: Innovaccer can leverage existing tech infrastructure to support some part of if not all of the
target’s operations
 Processes & Resources: Streamlining & rationalizing sales & marketing, maintenance, customer success,
admin, HR, finance processes and teams
 o Example: Innovaccer’s sales team can cross-sell Target’s CRM to existing clients, thus creating a
opportunity for downsizing Target’s sales and marketing team
 Shared R&D: Given the focus is on the same target segment, research and development will share
commonalities that can reduce the resources to achieve outcomes while accelerating them

Fit

Strategic Fit

 Innovaccer and the target share a common goal to improve better patient outcomes with the use of
technology and data, while operating in the same segment
 The target’s CRM solution, now transitioning to software based offering, fits with Innovaccer’s cloud-based
solution, thus enabling Innovaccer to create a unique extended value offering
 Onboarding improved CRM capabilities, enables Innovaccer to enter the market easily

Cultural Fit

 Share same values with respect to improving healthcare services with the use of tech and data
 Both organizations are headquartered and based out of the US and in the same segment, thus increasing the
likelihood of a work-cultural fit, understanding of legal and regulatory requirements
 Both organizations are entrepreneurial and will most likely share the same values with respect to working
styles, collaboration and atmosphere

Organizational & People Fit

 The 25 employees, post synergetic rationalization, can be integrated into Innovaccer’s workforce
 The 3 co-founders will bring their industry knowledge, proven performance record and wide network if given
leadership roles in Innovaccer
 It is necessary to evaluate leadership alignment between the 3 co-founders and the Innovaccer leadership
team

Risks (PESTEL)

Political

 Regulations & Data: Keeping up with data privacy laws and regulations, especially with respect the data of an
acquired company
 Data accessing in another country: Given that a part of Innovaccer’s data and tech team works out of India,
laws regulating the access of the target’s data in India needs to be evaluated
 Changes in healthcare laws: Change in government policies with respect to CRM patient outreach, and
unified healthcare data usage can create hurdles

Economics

 Recession: Economic downturn can lead to providers and HCOs to reduce their spending on technology and
value-add solutions across both population healthcare management and CRM offerings
 Due Diligence: A comprehensive financial due diligence of the target company is needed to ratify the growth
and profitability projections, while ensuring that there are no undisclosed liabilities

Socio-cultural

 Patient adoption: Evaluation of post-acquisition adoption by the patients of the target’s CRM solution is
needed; Offering the same CRM solution under the larger umbrella of Innovaccer’s applications can have a
negative impact on the patient’s perception of the quality of the software

Technological
  Integration challenges: Integrating the target’s tech stack and data into Innovaccer’s own stack needs to be
evaluated
 Data security: Ensuring the target’s data security guardrails are in compliance with Innovaccer’s and
regulator’s requirements. Ensuring that there are no past data breaches from the target’s end

Environmental

 Sustainability: Assessing the target’s environmental & sustainability goals and ensuring that they align with
Innovaccer’s own objectives in that regard

Legal

 Pending law-suits: Assessing the pending law-suits against the target (if any) and ensuring that the liabilities
arising from those are considered
 Anti-competitive law: Ensuring that the acquisition does not breach US anti-competitive laws

Recommendation

Final consideration of key decision factors –

 Financial, Operational and Legal due diligence: Ensuring that the projections for revenue and profitability
align with Innovaccer’s objectives and appetite to absorb costs
 Customer & patient impact: Impact on the patients and the customers needs to be evaluated to ensure that
a post-acquisition scenario does not include a high churn rate of the aforementioned entities
 Cultural fit: Ensuring that the organizational cultural integration is seamless from the leadership to the
bottom layers

Final Recommendation

 Innovaccer should acquire the target to unlock the growth streams through the acquisition of the target’s
customers and CRM revenue, as well as the potential growth from cross-selling an improved value offering to
the existing customers
 This acquisition will enable Innovaccer to position itself as comprehensive healthcare tech provider and
strengthen its position in the market, thus warding off competition
 This will also propel Innovaccer towards it’s strategic pillar of “Experience” and enable it to provide value-
based care to patients