M&A SPECIAL REPORT
Stottlemyer explains Acentia's vision for acquisitions
Acentia deal for 2020 named top civilian deal of 2012
- By David Hubler
- Apr 19, 2013
Bucking the tide of a sluggish and uncertain economy last year, technology and management solutions provider Acentia on April 1, 2012, acquired 2020 Company LLC, a federal health IT provider.
2020 “was a hot, high-growth entrepreneurial business” that had won numerous IDIQs and had generated interest from a number of prospective buyers, said Bob Kipps, principal at Kipps DeSanto, an investment bank that advised 2020 on the deal.
“Strategy always drives acquisitions, not the other way around,” said Todd Stottlemyer, who joined Acentia as CEO in 2011, two years after Snow Phipps Group LLC, a New York private equity firm, acquired a majority stake in Acentia as part of a strategy to build a strong company in the government technology services space.
2020 “was a very strategic acquisition for us,” Stottlemyer said.
The acquisition was picked out of 103 deals that closed during 2012 as the best civilian acquisition according to a Washington Technology panel of merger and acquisition experts.
Acentia had its collective eye on the new Affordable Care Act and other health care changes that would impact payment models, quality measures and integrated clinical care. They also are tracking the key role that the Centers for Medicare and Medicaid Services will play in patient health care reform at the federal and state levels.
The company put together a strategic plan and a draft board that included a list of its capabilities, expertise, customer needs and desired contract vehicles. Acentia then looked at 150 prospective acquisitions or more, which the draft board narrowed to 44.
“And we’ve only actually been interested in three, and we merged and acquired one of them,” Stottlemyer said, but only after 15 months getting to know every aspect of 2020.
“The neat thing is that so many of the leaders of 2020 are now leaders at Acentia,” said Stottlemyer, who’s been involved in about 50 M&A deals in his career. Beyond the financials, the customers and the growth potential of a deal, he said, “One of the things we look at is culture. Is there a cultural fit around the core values of both organizations?”
“2020 was very much in our strategic sweet spot,” he said, because it popped up in so many of the categories the strategic plan had laid out, especially the substantial health care expertise of its management team – including Robert McCord, now Acentia’s president and COO, and Mike Raymond, chief strategy officer – and its strong positions with CMS and the Centers for Disease Control and Prevention.
“When you looked at our strategic plan, those were two customers that we really wanted to work for and grow into,” Stottlemyer said, as well as expanding Acentia’s current work with the Food and Drug Administration, the Military Health Systems, NIH and others.
Stottlemyer underscores that even before the deal was concluded, Acentia treated it as a merger not an acquisition even though it was the larger of the two companies.
On April 1, the new Acentia – now with about 1000 employees – hit the ground “running very, very hard to take advantage of the business opportunities first and foremost as a combined company,” he said.
The merger also brought with it 2020’s prime spot on the 10-year, $4 billion CMS Enterprise System Development contract, an indefinite-delivery, indefinite-quantity vehicle, awarded in 2007 to 16 contractors for acquiring, delivering and managing IT services
The merger has been a strategic success for another reason: With 2020, Acentia is now certified as CMMI level 3 for software development, ISO 20000 for information services management, and ISO 9001. In an industry where having at least one of the three certifications is a frequent requirement for winning new business, that’s a strong triad.
What’s ahead for this year-old expanded company? Data analytics is becoming a required tool in the health care IT solutions market. “That’s clearly an area that we’re doing some very good work in,” Stottlemyer said, “and is clearly an area we’d like to strengthen again.”