Digital Health

Oracle Acquires Cerner for $28.3B

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Sometimes when there’s smoke, there’s fire, and that was definitely the case with last week’s rumor that Oracle was in talks to acquire Cerner in one of the largest healthcare M&A moves of the year.

Database and cloud infrastructure provider Oracle is acquiring Cerner for $28.3B in a transaction expected to close in early 2022. Upon closing, Cerner will be organized as its own dedicated business unit, serving as Oracle’s “anchor asset” to expand deeper into the healthcare sector.

What does Oracle gain from the merger?

Cerner marks Oracle’s largest acquisition ever, with several key benefits justifying the move.

  • Oracle and Cerner share a large overlap in end users. Cerner has access to an existing customer base in a giant market, potentially expediting Oracle’s pivot toward the cloud by leveraging these established relationships.
  • Cerner is expected to be a source of durable revenue growth, with Oracle anticipating a positive earnings impact in the first year that is likely to accelerate as it expands Cerner’s services into new regions.
  • As Oracle looks to push into healthcare, access to patient data will be a deciding factor of success, and Cerner’s EHR data helps eliminate its reliance on third party data providers.

What does Cerner gain from the merger?

Cerner was valued at close to $23B heading into the merger (vs. Oracle’s $280B valuation), and it will be looking to pursue ways to use its newfound scale to help it move past the EHR business that’s been slowly losing ground to competitors like Epic.

  • Oracle’s resources, infrastructure, and cloud capabilities will accelerate Cerner’s pace of technology development, while its global footprint could also allow Cerner to reach new geographies faster than if it was a standalone company.
  • Oracle’s hands-free Voice Digital Assistant will become the primary interface for Cerner’s clinical systems, reducing time spent typing and creating more time to care for patients.
  • Cerner will move to Oracle’s Gen2 cloud with the goal of achieving “zero unplanned downtime in the medical environment,” a migration that should happen quickly because of previous integrations between the two companies. 

Industry Impact

If this strategy sounds familiar, it’s right from Microsoft’s playbook, with the tech giant acquiring Nuance for nearly $20B to add more clinical speech recognition tools while gaining a foothold in healthcare.

Cerner has been in the process of shifting its focus beyond its core EHR business, under the helm of David Feinberg, who left Google to become the company’s chief executive in October. 

Feinberg has stated that improving usability and data analytics would be a critical component of Cerner’s strategy going forward, and the combination of Oracle’s Voice Digital Assistant and cloud computing capabilities could go a long way toward making this strategy a reality.

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