Telstra boosts digital health business with $350m MedicalDirector swoop

The telco giant has scooped up software firm MedicalDirector after reaching a deal with owner Affinity Equity Partners.

Telco giant Telstra is set to scoop up software company MedicalDirector.

Telco giant Telstra has scooped up software company MedicalDirector after reaching a $350m deal with private equity owner Affinity Equity Partners.

The acquisition, foreshadowed by The Australian on Sunday, will see MedicalDirector, one of the nation’s largest patient management software companies, join Telstra’s growing health business at a time of booming demand for services.

The transaction was agreed over the weekend and comes after a lengthy sales process of the software company, that helps GP manage clinics.

Telstra Health Board chair Brendon Riley said the acquisition of MedicalDirector was a key step in Telstra Health’s aim to create a connected and improved digital health experience for all.

“MedicalDirector is a modern clinical and practice management solution that supports GPs and other medical specialists to focus on providing high quality care and reducing time on paperwork and administration,” Mr Riley said.

He said it supports consultations by medical practitioners through a comprehensive patient medical record, including electronic prescriptions, options for virtual consultations, patient care plans, real time alerts about drug safety and drug interaction, and a range of other functionalities”.

MedicalDirector was on and off the market through advisory firm Jefferies Australia from 2019. While the sale was paused through the worst of the Covid crisis, it began ramping up again around April, as revealed at the time by The Australian’s DataRoom column. In recent months, Telstra emerged as the favourite to win the race that is understood to have included at least one other interested party.

MedicalDirector’s chief executive, Matthew Bardsley, said he looks forward to working with Telstra Health “to help support the critical work of the healthcare industry through innovation and technology, never more so important than right now”.

Booming demand for Telstra Health’s business is believed to have prompted it to pursue the MedicalDirector acquisition.

The company is no stranger to bolt-ons: Over more than seven years, Telstra Health has grown through a series of acquisitions and start-up lines of business to become Australia’s largest eHealth company.

MedicalDirector’s software, meanwhile, is used by more than 20,000 clinicians each year and its platform processes more than 70 million patient consultations.

MedicalDirector is understood to generate about $30m in annual earnings before interest, tax, depreciation and amortisation and was thought to command a price 15 to 20 times its earnings, adjusting for Covid-19 impacts.

Its software offers assistance with electronic health records, patient management, billing, scheduling, care co-ordination, medicines information, clinical content and population health management for general practitioners and healthcare specialists.

The Sydney-based company with about 230 staff has a contract with the NHS in Britain to provide its Helix cloud software to UK-based general practitioners.

Affinity Equity bought MedicalDirector in 2016 for $155m from Healius, then named Primary Health Care.

The acquisition comes weeks after Telstra signed a $95m deal for a majority stake in Adelaide-based PowerHealth, a global healthcare software solutions business founded by Patrick Power.

The move comes as Telstra is currently eyeing a joint bid with the Australian government in Pacific Islands-focused telco Digicel. Last month Telstra confirmed that the federal government had approached it with the idea of buying Digicel, which is up for sale by its Irish billionaire owner Denis O’Brien. Most of the funding for the mooted $2bn acquisition is expected to come from Canberra.

Telstra has said the Digicel discussions are incomplete and there is no certainty that a transaction will proceed.

Telstra is scheduled to deliver its financial 2021 results on Thursday with analysts tipping a return to underlying sequential earnings growth for the first time since 2017.

At the same time the telco giant is expected to detail the structure of its previously flagged $1.35bn share buyback.

Brokerage Goldman Sachs is tipping financial 2021 underlying earnings of $7.2bn which represents 6 per cent on the year.

This compares to Telstra’s aspirations outlined earlier this year for mid-to-high single digital growth in earnings.