New Zealand health tech firm sells for $22m

An Auckland doctor turned businessman who finds inspiration in poetry – and relaxation with a coke and chips – is selling his software business in a deal worth close to $22 million.

Auckland-based Intrahealth Systems, founded by CEO Mark Matthews, has entered an agreement to be acquired by Toronto-listed Well Health Technologies for C$19.3m ($21.9m), subject to regulatory approvals.

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Just under 75 per cent of Intrahealth is owned by members of the Matthews family, including Mark Matthews, his young brother – Matthews Law principal Andy Matthews, and their father John Matthews QSO, who played a key role in the creation of Auckland University’s research commercialisation arm Uniservices, as well as being an early Diagnostic Medlab backer and former chairman of DNA Diagnostics, Proacta, and Southern Cross Healthcare.

Matthews was a house surgeon at Auckland Hospital when he thought there had to be a better way of using technology to manage integrated healthcare, “including greater engagement of patients in their own care management.”

He went back to varsity in the late 1980s, gaining an MBA from Switzerland’s IMD Business School before joining the Boston Consulting Group. In 1997, having developed his commercial chops, he co-founded Intrahealth with Dr Andrew Hall (who left the business in 2004 but retains an 11 per cent holding).

The NZ Defence Force was an early customer, choosing Intrahealth’s software to manage the medical record of its 10,000 uniform and civilian staff.

Today, Intrahealth’s products, which includes EMR (electronic medical records), systems for running a health practice, and software for mobile and virtual consultations, are used by some 15,000 clinicians across New Zealand, Australia and Canada.

A Well Health Technologies filing says Intrahealth generated approximately C$9m in revenues at an operating earnings margin of more than 20 per cent.

More than 80 per cent of Intrahealth’s revenue is high-margin recurring revenue.

Why sell now?

“Over the last couple of years, we have been approached for acquisition almost weekly,” Matthews tells the Herald.

“But we had never found a good match with our values, or vision.

“Finally we met Well Health, who shares our vision and felt an instant cultural rapport, as clichéd as that sounds.

“Well Health will maintain Intrahealth’s identity and direction – even accelerate it – which, selfishly, appealed to me rather than disappearing into a giant corporate. It also means continuity and stability for our staff and customers.”

Matthews (59) will stay with the company he founded under its new owners. He wants to look after his baby … and the price includes a C$3.85m earn-out clause, payable after three years.

Will he invest in another health startup?

“I seem to have many things that spark my interest – often disturbingly ambitious – but my focus now is making sure Well and Intrahealth connect smoothly and successfully for our two companies, customers and staff,” Matthews says.

“Beyond that?Who knows? My mind never stops.”

The deal, inked on March 7, is expected to close in the second quarter.

Postscript: The secrets to his success

In an earlier Herald interview, Intrahealth co-founder Dr Mark Matthews talked about his shift from being a house surgeon to the CEO of a startup. Highlights:

What is the most important lesson you learned on your way up?

There are two. One is the importance of the people you work with, both from a professional point of view, and social dimension – are these people that I feel good working with? That’s important, especially in a smaller company.

The second big lesson is a motto I have taken from a Robert Browning poem – “A man’s reach should exceed his grasp”. It means that you push yourself beyond what you can realistically achieve, because if you don’t, you become idle. You have to be striving and ambitious.

How do you relax?

I have so much going on in my head that it’s very hard to switch off.

I have to take my head to a different place, so I get a really good book, a packet of potato chips and a glass of Coke and I go to a completely different world. If I don’t, my mind just goes straight back to work. I also ski and boat.

When did you first become a manager?

When I started Intrahealth. That was the first time I became responsible for managing the entirety of an organisation.

Before that I worked at the Boston Consulting Group for a long time and my role was manager. But I was part of a very large organisation, and in fact you find there are an awful lot of people supporting you, and even though you don’t realise it, they’re sharing the load. But when you come into a smaller company and have to do it all yourself, it’s manager with a capital M.

What annoys you most?

Unethical, dishonest behaviour in the workplace. That’s been one of my big disappointments because I pride myself and the company on being extremely ethical. But there have been a number of situations I’ve been confronted with where the reactions on the other side haven’t been the same. It’s hard to handle that. My view has always been that if you’re ethical or honest, in the long run that will pay off.

If you were starting over again, what would you do?

My career has been a little unusual. I’ve done clinical medicine, then management consulting, and now I’ve got an IT/healthcare company. I like the way it brings together all of those things – and I’m not sure I’d do anything different. Perhaps I might start Intrahealth earlier, but I can’t think of any other way of structuring my career that would make this better. Healthcare is a very uplifting industry.

What management wisdom is most overrated?

Pure academic credentials are critical, but they are only a starting point. Being given a good academic tool kit is important, but without practical experience you are very underdeveloped. That’s why people who succeed with no academic credentials probably do better than those with lots of credentials but no experience.

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