3M to acquire M*Modal technology business for $1 billion

3M is paying $1 billion to acquire M*Modal's technology business

December 20, 2018
by John R. Fischer , Staff Reporter
3M is set to acquire the technology business of M*Modal, a provider of cloud-based, conversational AI-powered systems, for $1 billion.

The Minnesota-based manufacturer seeks to use M*Modal’s technology and resources to strengthen its revenue cycle management and population health priority growth platform, as well as build up the progress of its Health Information Systems business, which works with more than 8,000 healthcare providers and payers worldwide to deliver software and services.

“Together, we will enable doctors to improve the patient experience, while enhancing documentation accuracy and operational efficiency for both providers and payers,” Mike Vale, executive vice president of 3M Health Care Business Group, said in a statement.

The acquisition follows a number of achievements scored by 3M this year, including the recent FDA clearance of its 3M Attest Super Rapid Biological Indicator (BI) System for Steam, which provides BI test results in just 24 minutes, and the introduction of its single-patient stethoscopes for patients in isolation to prevent the transmission of infectious diseases.

Annual revenue of M*Modal’s technology business is estimated to be approximately $200 million. On a GAAP reported basis, 3M estimates the acquisition to be $0.10 dilutive to earnings in the first 12 months following the completion of the transaction.

Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M expects the deal to be neutral to its earnings over the same period. The effective enterprise value multiple is approximately 10 times the estimated annual adjusted EBITDA for the first 12 months after the completion of the deal, which includes expected run rate synergies.

The completion of the transaction will bring on board approximately 750 employees from the technology business of M*Modal, located in Pittsburgh.

Not a part of the transaction is M*Modal’s transcription, scribing and coding services business, which will maintain a strategic business relationship with 3M to ensure continuity and strong customer support.

“We are excited that we can further accelerate our mission of creating time to care for more clients with the resources and global reach of 3M,” said Michael Finke, president of M*Modal, in a statement. “By combining capabilities, we can more quickly deliver on our mission of bringing conversational AI and ambient intelligence directly into clinical workflows. This is a great outcome for our clients, partners and team.”

Advising 3M financially and legally are Goldman Sachs & Co. and Cleary Gottlieb Steen & Hamilton, respectively. M*Modal will be serviced by TripleTree on a financial advice basis and Latham & Watkins as its legal counsel.

The deal is expected to close in the first half of 2019 and will be subject to customary closing conditions and regulatory approvals.

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