Now it is clearer why McKesson hit the iSoft plc posts here. The Timesonline covers the story that the iSoft auction is drawing its brakes with three serious, and possibly four, suitors waiting: McKesson, Cerna [sic - Cerner], General Atlantic Partners and (unnamed but presumably) Philips.

The first three are all major US players in the clinical applications market (General Atlantic through ownership of Eclipsys). And all face at home strong competition (albeit in a growing sector) perhaps most notably from privately-held Epic Systems Corporation. Epic has shown stunning organic growth since 2002 and client love for them abounds. Epic's internal reputation amongst its IT recruits is mixed though, varying from "dynamic" to "a sweatshop" and the firm is an impressive visa-sponsor for IT engineers from the sub-continent. McKesson, by contrast, owes much of its growth in the last decade to the acquisition of HBOC, Inc. in 1999.

The likely sales price cited by the Times is circa £200m. That is one times sales where 1.5 times might be more usual. However, the small matter of a funding gap of £100m-£150m over three years explains. Of course, that £200m number could have been reached in any number of ways, with adjustments for iSoft's context: x8 free cash flow; replacement value; P/E peer comparisons; x4 EBITDA; Discounted Cash Flow [the buyers' favourite]; and so forth. But however the skinning of the cat / making-up of the swine was argued, getting on for twice current market cap does not look unreasonable - in the absence of further detail.

Finally, this long-holding scribe cannot but cynically admire the timing of the leak (aka setting the bar) from the Times' unnamed source - (cross-ref earlier post on Interquest and Midas). Swings and roundabouts.

The writer holds iSoft equity

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