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Cognizant's Executive Leadership Talks About the Company's Decision to Acquire TriZetto(ENP Newswire Via Acquire Media NewsEdge) ENP Newswire - 22 September 2014 Release date- 19092014 - On September 15, 2014, Cognizant announced a definitive agreement to acquire TriZetto Corporation for $2.7 billion in cash, subject to customary adjustments. Based in Englewood, CO, privately-held TriZetto is a leading provider of healthcare IT software and solutions. With more than $3 billion in combined healthcare revenue, Cognizant and TriZetto will serve nearly 245,000 healthcare providers, as well as approximately 350 payers with approximately 180 million covered lives in the U.S. The acquisition will create a fully-integrated healthcare technology and operations leader, positioning Cognizant to address the rapidly-changing healthcare marketplace-currently 17 percent of U.S. GDP-with next-generation solutions that increase efficiency, reduce costs and improve healthcare outcomes. 'Our clients have said to us they are looking for a provider that can integrate technology and services together,' Cognizant CEO Francisco D'Souza told Bloomberg. 'That's what makes this combination of TriZetto and Cognizant so strategically competitive.' 'We think we paid a fair price,' D'Souza told Financial Times, adding, 'Companies like this seldom come at a discount...we paid what we think we needed to pay to get the deal done.' He said the deal would allow Cognizant to extend outsourcing further into America's healthcare sector, at a time when regulatory changes, including the implementation of the Affordable Care Act, commonly known as Obamacare, were forcing providers to cut costs and change business models. 'The healthcare industry in the U.S. is going through a period of significant change,' he said. 'Part of this is cost pressure, but the Affordable Care Act also puts tremendous emphasis on consumerism in healthcare, of putting more information in the hands of patients...so this is another place where technologies can play a substantial role.' Fortune quoted D'Souza as saying, 'The integrated portfolio of capabilities across technology and operations will uniquely position us to help clients drive higher levels of operational efficiency, while re-imagining care for the future.' 'This is a very unique moment in the health-care industry,' CRN.com quoted D'Souza as saying. 'Our health-care clients are looking at how they build the winning business models of tomorrow. They're grappling with new regulations, grappling with shifting demographics of an aging population, dealing with new digital technologies and, overall, dealing with this very significant changing industry landscape. Against that backdrop, what we're seeing is our health-care clients are looking for an integrative technology and services partner which will allow them...to run more efficiently and...take advantage of the market and drive that top line.' D'Souza said both companies are looking to the future of IT operations in the healthcare field and said the 'As-a-Service' solution was a way to combine services, software and analytics, for a modern adaptable approach. 'TriZetto shares this vision. We're clear on their objective,' he said. 'This is the winning business model of tomorrow. We're excited to create new opportunities for our clients.' 'This acquisition is a natural fit for us,' The New York Times quoted Cognizant President Gordon Coburn as saying. 'It represents a great opportunity to integrate services across our three horizons - traditional IT services; high-growth businesses such as management consulting, business process services and IT infrastructure services; and emerging delivery models-and provide even greater value to our clients.' 'TriZetto runs a lean and thoughtful operation,' Coburn told Denver Post. 'We expect to keep the people at TriZetto. There are no layoffs planned...Denver will become a health care hub for us.' By combining technology and services in one offering, the companies expect to lower costs for customers and gain a larger share of the market for health care payment management. 'What we are offering and the scale we will be offering-this is a new model,' Coburn added. In response to a question from Business Line, Coburn reiterated, 'TriZetto already runs a streamlined organization; so this acquisition is all about opportunity and growth, not cost reduction. As such, there are no layoffs planned.' He added, 'TriZetto and its 3,700 employees will be a part of Cognizant's existing healthcare business. We look forward to welcoming the TriZetto team into the Cognizant family.' 'Unique, high-quality assets are rare in this industry,' Karen McLoughlin, CFO, Cognizant, told Business Standard. 'We believe the price we have agreed to pay is a fair one, in line with the valuation of this type and quality of asset. In addition to TriZetto's attractive current business with approximately $711 million in LTM (last twelve months) revenue at an attractive profit margin, we believe we can drive incremental revenue above and beyond what Cognizant and TriZetto would have done on their own of approximately $1.5 billion cumulatively over the next five years.' Speaking with The Economic Times, McLoughlin said, 'Healthcare in the U.S. is undergoing significant structural shifts due to reform and cost pressure. And we are seeing it with our customers. This creates a significant growth opportunity and we have a worked with TriZetto for a fairly long time and so we know their clients and ours. So we knew this is the best bet for us.' She added, 'We expect to have over $1.5 billion revenue synergies over the coming five years. The earnings benefit is expected to increase over time as we realize significant revenue synergy potential from the combination of these businesses. We are extremely excited about this deal. We felt TriZetto gives us a good platform to significantly increase our presence in the US healthcare space.' 'TriZetto has a wonderful set of employees who are very passionate about the services they render,' McLoughlin told Business Line. 'They are also excited to join Cognizant. We have got a lot of positive feedback from customers and shareholders.' She said that one of the important things for people to understand is the scale of the opportunity and the kind of changes happening in the U.S. healthcare market. The transaction makes perfect sense given the changes driven by cost pressures and regulatory requirements in the U.S.' She added, 'TriZetto is very unique asset. They are the largest player in the U.S. healthcare IT space. We believe that this deal drives revenue synergies for us and that it enhances value for our shareholders.' According to McLoughlin, the key thing was to drive revenue synergies and ensure that the company had the appropriate go-to-market strategy. 'We will continue the TriZetto brand, as the company enjoys strong brand recognition in the US healthcare space. However, the target company will become part of our healthcare segment. The primary focus is to ensure that the two companies jointly service our customer's needs in the most effective manner,' she said. 'Healthcare has been the strongest practice for us and a unique differentiator for us for several years now,' Malcolm Frank, Executive Vice President, Strategy and Marketing, Cognizant, told The Times of India. 'Given the changes in the U.S. healthcare scenario and in the technology, we felt TriZetto was a unique opportunity. We see tremendous long-term revenue synergy through this acquisition.' He added, 'We examined the cultural issues very carefully. At Cognizant, we are quite passionate about our culture. We have been working closely with TriZetto for some time and we know the company and their associates quite well. We have strong operating relationship with TriZetto.' When asked about the size of the deal, Frank said, 'For several years, we have been considering something of this scale. We told ourselves that we should build leadership in a vertical, then look at large acquisitions. We believe that we have the right company now.' 'The acquisition was driven by two large factors,' Frank told The Street. 'We think there's tremendous change and opportunity over next decade plus, and from tech standpoint, social and mobile and big data are changing delivery models. We saw those two coming together and the strength that we have in healthcare, there was a unique opportunity to bring the two together.' Frank explained that the methods of sending software and IT infrastructure to clients are changing, so it made sense to have a partner with 'deep industry knowledge' that could only be a leader in the healthcare space. 'There's lots of opportunity in the here and now, and it sets up well for evolution of healthcare market going forward,' he said. Frank added that Cognizant had been looking at this kind of strategic kind of deal for two to three years, so when the TriZetto opportunity arose, it fit the company's view of the market. 'We've been partners for many years, we have a long working relationship, and our partnership model works because there's no overlap.' 'There's a lot of opportunity in the healthcare space now, due to the ongoing rollout of the Affordable Care Act and new technology developments across the industry,' Frank told CRN.com. 'Healthcare in the United States, to begin with, is going through some structural change and fundamental changes. When you look at what's happening with Obamacare, combined with what's happening with the digitization and the move to consumerism, we think those are very large trends which are driving this. Social technology as well as mobile, advanced analytics and the cloud are all creating opportunities in the health-care market' He added, 'It was through that lens that we viewed this opportunity [to acquire TriZetto]...and we do think it's a game-changer to provide the full capability for the full stack for both payers, providers and, ultimately, the consumers. [TriZetto] had the leading software platform in the healthcare industry and, from that standpoint, they have a recurring revenue model with many of their clients. We think it's a great combination because you get that platform combined with our leadership around health-care services. We thought it made all the sense in the world to bring all those capabilities together.' Frank said this is the largest acquisition Cognizant will look to do in health care for the time being, noting TriZetto has a 'strong ecosystem' of partners Cognizant is hoping to build on. 'We think the IT industry is at an important shift point as things go digital. We think that has a profound impact on our clients. We're going to continue to push with the transition toward digital businesses.' (c) 2014 Electronic News Publishing - |