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    120. mckesson part 8   deal 120. mckesson part 8 deal Presentation Transcript

    • H.I.S.-tory by Vince Ciotti Episode #120: McKessonPart 8 = The Deal! + = © 2014 by H.I.S. Professionals, LLC, all rights reserved.
    • Deals to Date • Below is a visual recap of the dozens of HBOC deals to date:
    • The Biggest Deal in HIS-tory! • We’ve covered scores of mergers & acquisitions (M & As) during these 100+ HIS-tory episodes, but the next one involving HBOC was easily the biggest& “baddest” acquisition in our industry. • Some of the other big M & As include: - Siemens acquiring SMS for ≈$2.1B - Allscripts buying Eclipsys for $1.35B - NTT Data acquiring Keane for $1.2B - GE buying IDX for $1.2B • Indeed, HBOC had already spent a ton: - CliniCom came in about $190M - FDC (Amex/SAI/Mac) cost $125M - IBAX was a bargain at only $45M… • So the $14.5B deal between McKesson and HBOC set a hew high in financial terms, and a new low in moral & human terms…
    • Role Reversal • As an indication of just how big HBOC’s appetite for acquisitions had become by 1998, in July of that year, the two firms began discussion of a potential deal that would have seen HBOC (annual revenue of ≈$1.5B) acquiring McKesson (≈$20B in revenue)!? • Word of that deal leaked out ending the talks, causing HBOC’s stock to tank 22% in 2 days. HBOC’s weakened stock price caused the roles to be reversed in subsequent talks, which this time were kept under wraps. • The companies announced their definitive “merger” agreement on Oct. 18 under which Charlie McCall would become Chairman of the new McKesson/HBOC, with McKesson’s Mark Pulidoas the the President & CEO.
    • Birth of an HIS Giant • The combined firms had an enormous client base: – HBOC had 2,800 hospitals on its many diverse systems – McKesson sold drugs & supplies to over 2,200 US hospitals. • The two also sold to 25,000 retail pharmacies, 35,000 physician practices, 10,000 extended care sites, 600 payors, 450 drug manufacturers and 2,000 medical-surgical manufacturers • Ittruly was an industry facelift:
    • The Unraveling Begins • Initial reaction from Wall Street was surprisingly cool, with HBOC’s stock off 3.5 on NASDAQ, down to 26 & 1/8, while McKesson’s remained flat at 88 & 11/16 on the Big Board. Meh… • In April, 1999, a routine audit turned up major problems - see right: • When word leaked that McKesson/HBOC had to reinstate earnings, its stock plummeted 50%... • And just who had been HBOC’s audit firm? • Just think Enron A A little bit later…
    • Armageddon • This sad series of images recounts McKesson/HBOC’s downward spiral over the next year:
    • Armageddon, cont’d • And the headlines kept getting worse:
    • Unique? • It’s sad how little we remember of past history… Scandals such as McKesson/HBOC’s shock us to the core, then are forgotten in a nanosecond as the next news/tweets/likes hits our screens. • Remember “HIS Insider” that tried to go on-line years ago, before the era ofinteractive blogs like Mr. HIS-Talk’s? • They pointed out in this piece a number of 2003 lawsuits, as almost every vendor out there has been enmeshed in some sort of scandal over it HIS-tory… • McKesson/HBOC was just the largest and got caught!
    • Takeaway? • It’s a little hard to make light of such a sad turn of events, but there is one interesting way to look at the McK/HBOC scandal. • Ever heard from tech friends in other industries how “behind” healthcare is compared to others? Well, tell them about this: • Next time you hearhow behind we are, point out to your non-healthcare friend how our industrybeat the whole country to the punch when it comes to accounting scandals: the 1999 McK/HBOC debaclepredated Enron in 2001 by a full 2 years, and even involved the same audit firm! • Another interesting perspective: most vendors’ fiscal year end is New Years eve, except a few: like Siemens = 9/30. McKesson’s is March 30, so their fiscal year starts on April Fools Day…