IBM reaches deal to sell Watson Health assets to private equity firm for $1B-plus
IBM has reached a deal to sell Watson Health’s data and analytics assets to an American private equity firm, the two parties announced Friday morning.
Bay Area-based Francisco Partners did not disclose how much it’s paying Big Blue. However, Axios revealed earlier this month that IBM was seeking more than $1 billion for business segments such as Merge Healthcare, a provider of tools for handling and processing medical images. Bloomberg pegged the price at north of $1 billion, citing sources familiar with the agreement.
IBM has spent more than $4 billion to assemble its package of healthcare offerings through a series of acquisitions. Those transferring hands to Francisco Partners also include Health Insights, MarketScan, Clinical Development, Social Program Management and Micromedex. The transaction is expected to close in 2022’s second quarter, subject to regulatory approval.
“Today’s agreement with Francisco Partners is a clear next step as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy,” Tom Rosamilia, senior VP of IBM Software, said in a statement. “IBM remains committed to Watson, our broader AI business, and to the clients and partners we support in healthcare IT. Through this transaction, Francisco Partners acquires data and analytics assets that will benefit from the enhanced investment and expertise of a healthcare industry focused portfolio.”
The private equity firm’s investments have spanned more than 400 technology companies over the course of 20-plus years, with “extensive experience” in healthcare IT. Francisco Partners’ portfolio covers a range of products and tech solutions serving all health industry stakeholders including patients, providers, payers, pharma, life sciences and governments.
“We have followed IBM’s journey in healthcare data and analytics for a number of years and have a deep appreciation for its portfolio of innovative healthcare products,” Ezra Perlman, co-president at Francisco Partners, said in the statement. “IBM built a market leading team and provides its customers with mission critical products and outstanding service.”
IBM first launched Watson Health with lofty aspirations of utilizing artificial intelligence to analyze healthcare’s many data streams and revolutionize cancer care. But its aspirations have not come to fruition, Bloomberg noted, with some customers complaining that products have not lived up to the hype. Watson Health has continued to lose money, despite generating $1 billion in annual revenue, according to previously published reports.
The current management team is expected to continue on in similar roles in the new standalone company, serving existing clients in imaging and other sectors, the two said.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.