Axios Pro Exclusive Content

Second time's a charm for ResMed

Jun 14, 2022
Illustration of a heart rate monitor screen with the line forming a red cross.

Illustration: Brendan Lynch/Axios

Hg is set to make more than four times its money with the $1 billion sale of German health care software firm MediFox Dan, sources familiar with the matter tell Axios.

Driving the news: San Diego's ResMed, which plays in both cloud-connected medical devices (like CPAP machines) and SaaS digital solutions, said Tuesday it would buy MediFox.

  • ResMed with the deal expands its out-of-hospital SaaS ecosystem beyond the U.S., inheriting Germany's dominant leader. (MediFox serves 50%-plus of the market, two sources say, the next largest accounting for some 10% or less.)
  • ResMed SaaS also gains entry into new care settings including youth, disabled, and outpatient therapy, Bobby Ghoshal, SaaS president at ResMed, says.

Behind the scenes: This isn't ResMed's first run at MediFox. The publicly-traded company was in the sale process four years ago when Hg prevailed, and this time it moved much quicker to make sure it came out on top, two sources tell Axios.

  • The Houlihan Lokey-run sale process garnered massive interest from private equity buyers, while other strategics were also in the mix, sources say.
  • "ResMed has been watching MediFox Dan for several years," Ghoshal notes. Evercore advised ResMed.

By the numbers: MediFox's pro forma net revenue and pro forma adjusted EBITDA were $83 million and $35 million, respectively, during the calendar year 2021, per the announcement.

  • MediFox had a 14% revenue CAGR over FY 2019-2021, Ghoshal says, indicating the top line should reach around $95 million this year. That suggests a forward revenue multiple in the 10-11x zip code.
  • MediFox, with more than 600 employees across Germany, provides digital solutions that are used by thousands of home health, nursing home, outpatient therapy and other care providers.

Catch up quick: Hg invested in MediFox in 2018 and subsequently executed nine acquisitions, the largest being its marriage with Dan in 2020.

  • Under Hg, it transformed from a software company tailored exclusively to outpatient elderly care by branching out into new markets and products such as those serving caregivers, e-learning, as well as AI-based tools.

State of play: Ghoshal says multiple tailwinds in Germany position MediFox for accelerated growth.

  • That includes...higher demand for care providers as Germany's population skews older, staffing shortages, and a greater willingness on behalf of German payers to invest in the digitization of care.
  • "It's bulletproof business," one source adds, explaining that with German health care paid by the states, growth is disconnected from the overall macro environment.

Context: For ResMed, the deal builds on the SaaS division's track record of M&A focused on helping millions of people "navigate into and between various care settings, and get the support they need, and live healthier lives," Goshal says.

  • The ResMed division last shelled out $750 million in 2018 for MatrixCare, previously bought Brightree for $800 million, and HEALTHCAREFirst for an undisclosed amount.

Ghoshal's bottom line: For all constituents (ResMed, the incoming MediFox team, and Germany's care providers, patients and families), "we believe this investment will pay for itself many times over," he writes.

Editor's note: This article has been updated to correct the Brightree and HEALTHCAREFirst deal details.

Go deeper