By Matilda Oculy, Aadit Jain, András Szabó, and Deimantė Chailenko (Manchester), Joshua Ooi, Ayushman Nath, Danissa Wan, Jack Wu, and Samuel Altass (Cambridge)
Photo: Online Marketing (Unsplash)
Overview of the deal
Acquirer: Stryker Corp.
Target: Vocera Communications Inc.
Implied Equity Value: $2.97B
Total Transaction Size: $3.09B
Closed date: End-March 2022
Target advisor: Evercore Partners LLP
Stryker aims to dramatically reshape its digital patient outreach efforts with the acquisition of $3B Vocera Communications, in a deal anticipated to conclude by end-March 2022. It sees the acquisition as a key plank of a strategy to link up its various data-generating medical devices - Vorcera’s portfolio of hands-free voice communication technologies provides a range of synergies for Stryker’s existing portfolio of medical devices. The demand for such technologically-integrated medical devices is only expected to rise; following the COVID-19 pandemic, medical staff and patients alike are increasingly aware of the benefits of connecting remotely (through telemedicine visits or regular check-ups). At the same time, a high demand for real-time, personal interactions remains - Vorcera’s voice communication technology will be especially helpful in creating the level of interactivity desired.
“Now, we can start to look at slightly larger tuck-ins while we continue to pay down the debt. Valuations are very high, overall, but there's still a lot of targets. We feel pretty confident that we'll be able to continue to … find value-creating acquisitions for Stryker”. - (Kevin A. Lobo - CEO Stryker)
Company Details (Acquirer - Vocera Communications)
Vocera Communications, Inc. provides secure, integrated, and intelligent communication and workflow solutions that empower mobile workers in healthcare, hospitality, retail, energy, education, and other mission-critical mobile work environments in the United States and internationally. The company’s communication solution integrates with other clinical systems, including electronic health records, nurse call systems, and patient monitoring, as well as to provide critical data, alerts, alarms, and clinical context that enable workflow.
Founded in 2000, headquartered in San Jose, California
CEO: Brent Lang
Number of employees: 688
Market Cap: $2,758M (as of 20/01/2022)
EV: $2.72B
LTM Revenue: $225M
LTM EBITDA: $11.8M
LTM EV/Revenue: x12.1
LTM EV/EBITDA: x176.3
Company Details (Target - Vocera Communications)
Vocera provides secure communication services to healthcare professionals working across 2,300 facilities worldwide. Its main solutions include Vocera Smartbadge, a hands-free communication system, and Vocera Edge, a cloud-based system enhancing workflow optimization and efficiency. The company operates in the UK, Australia, Canada, India, the United Arab Emirates, and the US, with a primary focus on the US.
Founded in 2000, headquartered in San Jose, California
CEO: Brent D. Lang
Number of employees: 688 (2020)
Market Cap: $2.748 billion (as of 14/01/2022)
EV: $2,719.3 million
LTM Revenue: $225 million
LTM EBITDA: $13.3 million
LTM EV/Revenue: x12.09
LTM EV/EBITDA: x343.30
Projections and Assumptions
Short-term consequences
There are clear revenue synergies for Stryker: Vocera brings a highly innovative portfolio that can help complement Stryker’s medical division. This comes as hospitals increasingly seek to connect caregivers and disparate data-generating medical devices; having a subsidiary like Vocera will enhance Stryker’s unique value proposition. Product efficiencies and improved health and safety outcomes will help drive long-term revenue growth - for instance, Vocera’s highly developed remote communication hardware services will help complement Stryker’s Advanced Digital Healthcare offerings.
Secondly, the acquisition also allows Stryker to build on Vocera’s pre-existing partnerships. Vocera recently announced that it would work with Amazon to bring its programmes onto Alexa devices, in order to improve patient accessibility (both at home and in hospitals) to an approved healthcare app in the US. Verbal requests made by Alexa would be analysed and forwarded to the most relevant care member of the patient’s care team. With this tie-up, Stryker will be able to build on its existing strengths as a care coordination provider, riding the telemedicine wave to increase its customer base.
Long-term Upsides
The deal is embedded in the trends towards telehealth and worker safety, which have soared since the beginning of the pandemic and are forecasted to gain momentum in the long-term. It will enable Stryker to consolidate its Medical division through Vocera’s highly innovative medtech portfolio. Stryker will increase its offering in voice communication solutions to enhance digital care coordination, including Vocera Smartbadge, voted on the Time’s list of the 100 Best Inventions of 2020.
Risks and Uncertainties
There can be various factors that may affect the result of the deal such as the impact of the COVID-19 pandemic or any policies and actions taken by the government with regards to the pandemic on their operations and financial results.
There also might be a possibility of not fulfilling the closing conditions of the deal including receipt of any required regulatory clearances, delay in acquisition of Vocera or any unexpected liability or cost and charges the firms come across with relation to the acquisition of Vocera.
Moreover, changes in the foreign exchange markets, legislative and regulatory actions and potential supply chain disruptions could be a big obstacle for Stryker and cause hindrance to the benefits obtained from this deal. The weakening of the economy could adversely affect the demand for their products and, as a result, simultaneously affect the pricing for their products.
Most importantly, the costs to comply with medical device regulations might increase due to the new regulations that might come in as well as the changes in the financial market which would result in fluctuations in the competitive environment. It is also difficult to assess whether Stryker can integrate and realise the anticipated benefits of the acquisition in full or at all within the expected timeframes.
“This acquisition underscores our commitment and focus on our customer...Vocera will help Stryker significantly accelerate our digital aspirations to improve the lives of caregivers and patients.” - (Kevin Lobo, Chair and Chief Executive Officer, Stryker)