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Analysis

Athenahealth CEO Exit Means Sale More Likely

By Philip Betbeze  
   June 07, 2018

Analysts’ Reactions

Piper Jaffray senior research analyst Sean W. Wieland issued a report that raised its price target for the stock to $179 from $155 based on the greater likelihood of a sale following Bush's resignation. He cites several reasons the company could attract multiple bids that would improve on Elliott's earlier offer. Among them:

  • Athenahealth is among the highest quality assets in the health IT sector.
  • It was an early entry to the cloud platform, with a recurring revenue business model.
  • Athenahealth's decelerating recent growth is a function of healthcare industry dynamics rather than company-specific tactics.
  • The company has demonstrated a strong ability to drive incremental margins.
  • Many strategic buyers may now be interested, including Oracle, Microsoft, and Salesforce.

SunTrust Robinson Humphrey analyst Sandy Draper also weighed in after Bush's departure, assigning a $180 price target on the stock.

Draper describes Elliott's bid as a valuation floor and says Athenahealth is now more likely to be acquired. Among her reasons:

  • Bush founded Athenahealth, has been its only CEO, and he ran the company the way he wanted to even if shareholders didn't necessarily like it.
  • The board is reviewing strategic alternatives officially, after declining several prior calls from Eliot to do so.
  • Elliott indicated it might be willing to pay more for the company if given proper due diligence.
  • Bush owns only 2.8% of the company, and now that he's not officially involved in day-to-day or strategic decision-making, it's easier for potential buyers to make substantial changes without going around him.

Bush is a nephew of former president George H.W. Bush and a cousin of former president George W. Bush. He had led the company since its inception in 1997. It had its initial public offering in 2007; shares debuted at around $35 a share.

The software and cloud services company provides billing, electronic health record and other services to more than 100,000 accounts, including physician groups and hospitals and health systems.

Philip Betbeze is the senior leadership editor at HealthLeaders.

Photo credit: Former Athenahealth CEO Johnathan Bush at Fortune Brainstorm TECH in 2011. (Stuart Isett/Fortune Brainstorm TECH)


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