Dell's acquisition of information technology specialists Perot Systems in a transaction valued at $3.9 billion is a clear signal that the computer hardware giant plans to jump into the healthcare information technology sector with both feet.
The acquisition is expected to make Dell—already a major computer hardware manufacturer—a key player on the software and interactive side for healthcare information technology sector, which is the subject of a $20 billion government-financed incentive program.
"We haven't seen a transaction like this in 10 years, much less the last 18 months," says Mark Reiboldt, vice president of Atlanta-based Coker Capital Advisers. "Dell has had strategic focus on healthcare for a while. They saw the writing on the wall. Everybody was getting in. Their overall strategy in the last two years was to entrench themselves a little deeper in the solutions and services base and not be so reliant on hardware."
Over the past four quarters, Dell and Perot Systems had a combined $16 billion in enterprise-hardware and IT-services revenue, with about $8 billion from enhanced services and support.
Under the agreement, Dell will commence a cash offer to acquire all of the outstanding common stock of Perot Systems for $30 per share. The transaction is expected to close next quarter, pending government review.
When the acquisition is completed, Perot Systems will become Dell's services unit and be led by Peter Altabef, the current Perot CEO. Ross Perot Jr., Perot' chairman, is expected to be appointed to the Dell board.
Reiboldt says he doesn't understand why Dell paid $3.9 billion for Perot, which represents a 68% premium on the value of the stock at the close of business last week. "A lot of people are thinking they paid too much. There could be something we are missing and Perot is a great company, but I'm not sure I see the rationale behind the valuation as it is today," he says.
Reiboldt says he anticipates more mergers and acquisitions in the coming months in the HIT arena as more companies position themselves for the $20 billion government windfall in HIT. "Healthcare as a whole is leading the way in terms of deals coming back into the market. This integration on HIT is coming at all levels. We are seeing a $4 billion Dell-Perot acquisition and we are seeing a lot of middle-market buzz."
"The path now is not going to be the IPO. Acquisitions and consolidation is the name of the game for HIT, particularly when you're talking about the stimulus money out there," Reiboldt says. "Companies' mouths are still watering, trying to wrap their heads around how that is going to play out."