Software firm Picis to cut $155m deal to fund buyout
Picis Inc., a Wakefield software company that withdrew an initial public offering registration on July 3, is set to disclose today it's agreed to a $155 million investment from Goldman Sachs & Co. that will fuel its acquisition of a related company in Washington state.
The financing deal, which will be the largest private placement in Massachusetts so far this year, will enable Picis to buy Lynx Medical Systems of Bellevue, Wash., outside Seattle.
The transaction will make Goldman Sachs, the New York investment banking and securities giant, one of the largest shareholders in the privately held Picis.
Private placements are a class of investments in nonpublic companies that, unlike private equity or most venture capital financing, don't involve the financial firm taking control of the company.
In the Picis case, Goldman Sachs made the investment to capitalize on an opportunity in the rapidly growing medical software business. While Picis software automates clinical procedures in "high-acuity" hospital settings like emergency rooms, operating rooms, and intensive care units, Lynx software enables hospitals to bill procedures and care in emergency departments more accurately.
"We view healthcare as one of the most dynamic parts of the economy and are continuing to increase our capacity to invest in the sector," said Christopher D. McFadden , a managing director of Goldman Sachs who was involved in the Picis financing deal.
Picis, founded in 1994 in Arlington, Va., bought Medical Systems Management Inc. of Wakefield in 2002 and moved the Picis headquarters to Massachusetts. The company today employs about 480 workers worldwide, including about 170 in Wakefield.
Picis last August registered to go public, but withdrew its registration this month. In its filing, Picis said it hoped to raise $86.2 million through its IPO -- about $70 million less than it is receiving from Goldman Sachs.
"We saw this acquisition opportunity," said Todd Cozzens , the president and chief executive of Picis. "So the quickest way for us to fund the acquisition and acquire the opportunity was to pull the registration and jump in with this private financing deal."
Private placements are becoming more common in the healthcare field nationally, as large financial firms like Goldman Sachs have raised giant funds to invest in companies with high growth potential, said Violet Shaffer , a research vice president for healthcare at technology research firm Gartner Inc.
"Equity investors are seeing a new model for picking up gains in different scenarios where companies may not be poised for their ultimate value in IPOs right now," Shaffer said.
The acquisition of Lynx will add about 200 employees to the Picis workforce. Cozzens said he expected to retain the Bellevue site and most of the Lynx employees and executives.
He said Lynx software will enable Picis customers to recover millions of dollars in lost revenue from emergency room tests and procedures that aren't being billed. "Hospitals are losing money in their emergency departments because they're not properly coding charges," he said.
With the purchase of Lynx, Picis anticipates ringing up more than $125 million in revenue this year, Cozzens said.
He said the company still expects to go public some time down the road.
Robert Weisman can be reached at weisman@globe.com. 