Revenue Growth in Healthcare Companies

When a leading provider of healthcare software was acquired by a private equity firm, the PE firm’s value creation plan called for organic revenues to grow from ~$566 million to ~$600 million, while achieving a 40% EBITDA margin in less than two years. These were aggressive goals given that the normalized historic organic growth was flat, and their competitors were in decline. To hit these goals, the company needed to grow when no one else was. A large, brand-name consulting firm had performed due diligence on this company for the private equity firm. Part of this firm’s recommendations included a sales and marketing plan for revenue growth and margin attainment. There was a disconnect between the PE firm’s perception of this plan and that of the leadership team of the acquired company. The PE firm thought the plan was excellent. The leadership team believed it would take too long to execute, was too complex and expensive, in addition to being highly disruptive to their customers.