Who Buys athenahealth?

Who buys athenahealth is a question that has been asked by countless investors for the past several years.

A great company, athenahealth ($ATHN) represents a single instance, multi-tenant software platform.

In my view, a cornerstone franchise of digital health.

With the recent departure of CEO Jonathan Bush, the company seems to be a likely acquisition candidate.

We arrived at this point because of Elliot Management’s entrance into the stock.

Athena has faced some operational struggles – inpatient, slowing growth in EHRs, etc. HCIT is a struggling industry these days.

These issues resulted in Elliott making an offer for Athena at $160 per share

Many see a topping bid here.

There is a great video of Sean Wieland, Piper HCIT analyst, on Bloomberg, and our friends at Hedgeye have discussed this at length, too.

Consensus seems to be focused on a software company purchasing athenahealth.

In my view, I think software is too obvious, and think the hyperscale cloud companies will not be a buyer here.

The usual hyperscale suspects are Amazon, Apple, Salesforce.com, Microsoft, and Google:

I think the hyperscale guys will shy away because of the difficulties of healthcare and the fact Athena is not a direct to consumer model. Furthermore, I think the hyperscale types see greater growth with assets in other verticals.

In my view, a topping bid comes from one of two players: IBM or Roche.

IBM’s Watson Health has been struggling over the past several quarters. The business unit is comprised of several digital healthcare acquisitions of various asset quality. An acquisition of Athena makes sense because athena’s population health tools are built on IBMs Cognos TM1 system. What better way to turn around a struggling business unit than to inject $1.3B in revenue coming from a nice technology platform already built on your software.

Roche ($RHHBY) is the other likely candidate, as they seem to be consolidating key assets in digital health. The company acquired Flatiron Health the Oncology EHR a while back. On June 19th, the company announced that it would acquire the remaining public shares of Foundation Medicine (FMI). Given the FMI transaction, and the fact that a key player at Flatiron Health is stepping in at $ATHN, I think Roche could be a real player here.

In my view, combining Athena with Flatiron and FMI would create a formidable digital health platform company to help further drive oncology focused innovation.