Last week, Elliott Management released their third letter this month to athenahealth’s (ATHN) board, this time highlighting investment community support for the company to engage in a formal sale process. While it would certainly mark the end of an era, we continue to believe that going private is in the best interest of all stakeholders.

At this point in ATHN’s life cycle, there is little benefit to being a public company. In our view, the most likely option is that ATHN goes private, scales inpatient, stabilizes the core business, makes a few acquisitions, and goes public again as a stronger organization. While the Electronic Health Record (EHR) market is saturated, it remains highly fragmented among physician practices, which provides ATHN an opportunity to take share and potentially be more aggressive with M&A.

Meanwhile, there are enough legacy EHR vendors selling into hospitals (McKesson, MEDHOST, CPSI, MEDITECH) for ATHN to replace and become a meaningful player assuming they can execute and scale their hospital system.

Keyword = Execute. 

The most obvious and talked about strategic buyer would be a large, consumer tech company looking to break into Health Care in a big way (AAPL, AMZN, GOOG). We have long speculated that AMZN could buy ATHN, integrating athenaNet and ATHN’s network of +100k providers directly into Prime, and providing hospitals access to a large, commercially insured patient population in the process.

Other buyers we have heard are IBM, CRM, MSFT, and ORCL. We have heard some mention CERN, but find that outcome highly unlikely due to significant cultural differences between the two organizations. Moreover, CERN would have to offer north of $1,000/share for ATHN for Jonathan Bush to even consider selling to the enemy...! 

Overall, we would like to see ATHN remain a standalone company. We firmly believe that going private is in the best interest of all stakeholders. We hope the process moves quickly, as this type of uncertainty is terrible for ATHN’s employees, customers and prospects. While we believe Elliott’s initial offer of $160/share is a fair start, a deal ultimately gets done closer to $175/share.

Email to access our slide deck from 5/9 where we ran through our thoughts on the deal, the financial model, and valuation.