Amcom Software Acquired by USA Mobility
Amcom Software was acquired March 3, 2011, for $163.3 million in cash (press release). USA Mobility, one of the few companies left standing in the declining pager industry, purchased the company to strengthen their position in health care, and move beyond paging into messaging and unified communications.
Amcom was built through a series of acquisitions, including messaging middleware vendor CommTech Wireless. The CommTech Wireless solution provides event notification, including alarm notification that is called out in the final MDDS rule by FDA for enforcement discretion. Amcom’s plans regarding potential FDA regulation or limiting marketing claims (to exclude alarm notification) are not known. The company was undecided when asked about it at HIMSS in 2010. One would hope that this issue arose during USA Mobility’s due diligence.
UPDATE (3/7/11): Ron Wenaas for Amcom Software writes, “as one of the leaders in this space, Amcom Software is absolutely pursuing compliance with the recently published FDA regulations.”
Amcom’s strength in health care lies with their operator console products. This PC-based software integrates with the hospitals PBX and ADT system via HL7, presenting a user interface to operators who can easily look up and connect calls to hospital patients. Amcom is one of the few vendors to offer an operator console with ADT and HL7 integration. ADT stands for “admission, discharge and transfer,” the “hotel” function of the hospital information system that identifies and tracks patients throughout their hospital stay.
USA Mobility estimates Amcom’s revenue for calendar year 2011 at between, “$239 million to $255 million, operating expenses (excluding depreciation, amortization and accretion) would be in a range of $175 million to $183 million, and capital expenses would be in a range of $6 million to $9 million.”
USA Mobility is by far the largest wireless paging provider in the US, with over half the market. But the best years for the paging business are behind us. The worlds best-selling pager, Motorola’s Bravo, was introduced in 1986, and two-way paging was introduced (also by Motorola) in 1991 (source). As a side note, CommTech Wireless competitor Emergin (acquired by Philips) was built on a messaging engine built for Motorola in the 1980s. World wide, paging subscribers peaked in 2000 at almost 180 million and have declined since. According to paging industry analyst Brad Dye, US Mobility’s experienced a net unit erosion over the two year period between 2004 and 2005 from 7.4 million to 4.9 million units in service, a 21.5% rate of decline.
Coming out on top of a declining market is tough, and making the transition to growth markets is even tougher. It seems that US Mobility has taken an important step in that transition to growth markets with the acquisition of Amcom. Here are some of the key reason’s US Mobility made the acquisition from their press release:
- Acquisition of a growing business that aligns well with USA Mobility’s market segment focus.
- Comparable operating margins to those of USA Mobility, while materially enhancing USA Mobility’s revenue growth profile.
- Complementary products and services with a market segment focus around the Healthcare, Government and Large Enterprise business segments, allowing compelling cross-selling opportunities.
- Strong and growing installed customer base with very high maintenance renewal rates providing strong revenue transparency.
- Mitigation of erosion in USA Mobility’s installed paging base and establishment of a strong foundation for long-term growth.
- Immediate accretion to operating cash flow for USA Mobility shareholders. For calendar year 2010, Amcom’s stand-alone unaudited revenues were approximately $51 million, an increase of approximately 19 percent from 2009 levels, while its stand-alone EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) was approximately $12 million, up approximately 54 percent from 2009. We expect continued growth in revenue and EBITDA from Amcom.
Photo from Commtech Wireless exhibit at HIMSS 09