A4 Health Systems, a privately held provider of electronic health records and other services for medical practices, is being sold.
A4, which was founded in 1970 as Management Systems Associates, will become part of Allscripts, a Chicago-based firm, in a deal with $272 million in cash and stock.
John McConnell, chief executive officer of A4, will become part of Allscripts’ Board of Directors as part of the deal.
McConnell invested $4 million in A4 when he took over the company in October of 1998, according to The Triangle Business Journal. He became chairman and CEO in 1999.
A4’s investors include McConnell’s own investment firm, Wachovia Capital Partners and The Wakefield Group. A4 employees own 40 percent of the firm’s stock, according to company spokesperson Jennifer Lewis.
McConnell and the existing management team will continue to manage A4, Lewis added. “As for our employees, we intend to keep everyone in place,” she added.
A4 has some 400 employees and a customer base of more than 1,600 healthcare organizations.
“John and I have developed a solid working relationship,” said Glen Tullman, CEO of Allscripts, in a conference call. “I expect him to add substantial benefit to our company.”
Tullman described the deal as a “strong fit” with “little overlap” between the two firms.
Allscripts (Nasdaq: MDRX) also focuses on clinical software and information technology solutions for physicians.
“Allscripts and A4 are a natural fit that will provide a full suite of solutions to better serve the clinical and administrative needs of medical groups,” McConnell said in a statement. “The addition of A4’s (practice management system) will enable the company to compete more effectively where the majority of physicians practice, in medical groups with less than 25 physicians, where approximately 80 percent of clients purchase a combined solution.”
A4 will operate as a separate business unit, Allscripts executives said in the conference call.
Once combined with A4, Allscripts will be able to offer what it called an integrated electronic health record and practice management system.
“Our acquisition of A4 adds an established leader with a strong product offering and robust sales channel in two significant and largely untapped market segments – small, independent physician practices and mid-sized medical practice groups,” Tullman said in a statement. “Together with A4, we will extend our leadership to all market segments.”
A4 achieved $75 million in revenues in 2005 with net income of $8.3 million, the companies said in a press release.
The deal includes $215 million in cash and $57 million in Allscripts stock. It is expected to close in the first half of 2006.
McConnell co-founded Medic Computer Systems in the Triangle in 1982 and led the company to a public offering in 1992. Medic was sold to Misys Plc in 1997. McConnell invested in A4 the next year.