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Going into its IPO, investors were expecting nice gains from Emdeon. Well, the company did not disappoint. Last night, the company priced 23.7 million shares at $15.50 (this was an 11% increase in the number of shares). It was at the top of its $13.50-$15.50 range.
Emdeon runs a sophisticated platform that connects payers, providers and patients in the US healthcare system (built over the past 25 years). Yes, in light of the proposed reforms from the Obama Administration, this is certainly an attractive space. After all, a big goal is to find ways to cut costs -- and technology should be a key.
The platform handles things like: eligibility/benefits verification; payment distribution and denial management; patient billing; collections and so on. Last year, Emdeon processed roughly 4 billion transactions or about half of all commercial electronic healthcare claims (this was up from 3.7 billion the year before).
Last year, Emdeon posted revenues of $853.6 million with cash flows of $83.3 million. More than 90% of revenues are recurring. What's more, there is little customer concentration (the biggest customer represented 5.6% of overall revenues).
With is IPO proceeds -- and public stock -- Emdeon can bulk up with acquisitions. Given its extensive platform, there should be many opportunities to cross-sell new services. In fact, Emdeon purchased eRx Network LLC back in July.
So far in today's trading, the shares of Emdeon are up 16% to $18.
The underwriters on the IPO included Morgan Stanley (NYSE: MS), Goldman Sachs (NYSE: GS), UBS Investment Bank (NYSE: UBS) and Barclays Capital (NYSE: BCS).
Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook
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