IBM sells Watson Health to investment firm Francisco Partners

by John R. Fischer, Senior Reporter | January 21, 2022
Artificial Intelligence Business Affairs Health IT
IBM has sold the data and analytics business of Watson Health to Francisco Partners
Global investment firm Francisco Partners has bought the data and analytics business of IBM’s Watson Health.

The company took various parts of Watson Health, including Health Insights, MarketScan, Clinical Development, Social Program Management, Micromedex and Imaging Software Offerings. This gives it access to a broad array of health data, which it plans to use to create a new stand-alone company. It also will retain IBM’s management team for the data and analytics business, according to TechCrunch.

While neither company disclosed terms, previous reports said IBM was aiming to take away $1 billion from the sale. "Today's agreement with Francisco Partners is a clear next step, as IBM becomes even more focused on our platform-based hybrid cloud and AI strategy. IBM remains committed to Watson, our broader AI business, and to the clients and partners we support in healthcare IT,” Tom Rosamilia, IBM Software's senior vice president, said in a statement.

The current management team will continue to serve in similar roles as part of the new company and serve existing clients in life sciences, provider, imaging, payer and employer, and government health and human services sectors.

Francisco Partners will also add additional support to the new company. “Partnering with corporations to execute divisional carve-outs has been a core focus of Francisco Partners,” said Justin Chen, principal at Francisco Partners.

IBM has been searching for a way to exit the healthcare market for years. It sold three components of Watson Health in 2020 to group purchasing organization, Vizient. The three were ActionOI, CareDiscovery and Market Expert, according to Modern Healthcare.

It also unsuccessfully attempted to sell off the whole business last year as part of new CEO Arvind Krishna’s plans to streamline the company and focus more on being more competitive in the cloud computing market. It considered, at the time, selling the business to a private-equity firm or industry player, or merging it with a blank-check company.

Morgan Stanley led the process, with Watson Health generating roughly $1 billion in annual revenue. The company, however, was unprofitable, with cognitive applications revenue valued at $1.5 billion in the fourth quarter of 2020. This was a decrease of 2% year-over-year, and shares slipped 6.6% due to poor cloud and cognitive software performance.

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