In January, the president and CEO of health care solutions company Allscripts jumped at the opportunity to acquire A4 Health Systems, a move that doubled the company’s clinical software revenue and its work force.
Tullman says it can be dangerous to grow only through acquisitions but finding the right one can be a great move. Although Allscripts was already growing rapidly, the acquisition introduced the $120 million company to clients it didn’t have the product offerings to cater to before and added 1,600 health care organizations to its client base.
Smart Business spoke with Tullman about the process of acquiring a company and how acquisitions will fit into Allscripts’ future.
How do you decide which companies will make good acquisitions?
We always begin by looking at the people and whether there is a good cultural fit. A4 is about our size in terms of clinical revenues, they were close to our profitability, but most important culturalwise, they have a very entrepreneurial cultural that is very client-focused, and they were very tough competitors in the market. They have about 400 people. We have about 400 people.
We first looked at people and leadership. John McConnell, their CEO, is a great leader and has built more than one successful company, and he will be joining our board of directors. Their sales force is the best sales force in the market they compete in.
We thought there was a very good people connection, a very good cultural fit, and then, in terms of business itself, they were the leading provider in the markets they were in. Across the board, this was as close to a perfect acquisition as you can find.
How do you combine corporate cultures?
What you try to do is take the best from each of the organizations and blend them together to create a new culture kind of one plus one equals three. To give an example, as we evaluated financial systems, even though we were the acquirer, we thought their financial management system was better than ours, so we will convert to theirs.
In other systems, we might ask them to convert to ours. If you sell different products in different markets, it’s not like you have to combine everything, especially overnight.
How will you lead the company now that it has doubled its number of employees?
Our company has not only a solid management team, many of whom have worked with me in at least one other company, but in addition, we grew a group of secondary managers who are now ready to step up. That said, we expect that the leadership at A4 will continue to play a vital role in their success and in our company.
We also expect that some of our young managers will also step up and play an increasingly important role. Once again, it is a blending of the organizations.
What are the benefits of growing through acquisitions as opposed to internal growth?
Good companies do both. They want to make sure that they are in a business that is growing rapidly and ours is and that they’re growing internally. We have consistently grown between 40 (percent) and 50 percent or more internally.
Good companies are also opportunistic. When the opportunity came to double the market size, which allows us to be more responsive to all of our customers and invest more in research and development, that was an opportunity that was too good to pass up. I think good companies do both they make sure that they have an internal growth strategy, but they also look for acquisitions that are thoroughly valued and that would fit with the company.
How do acquisitions fit into your growth strategy for the future?
We don’t need to make an acquisition to grow because our own internal businesses are growing rapidly. On the other hand, we are going to be opportunistic. To the extent that great opportunities come along, we expect our industry to continue to consolidate, and we are going to look very closely for opportunities.
This is not a growth-by-acquisition strategy. This is a growth strategy that can be helped by appropriate acquisitions, and there is a very big difference.
HOW TO REACH: Allscripts, www.allscripts.com