Fortive to Acquire Provation Software for $1.43B

Diversified industrial technology company Fortive Corporation (FTV) recently revealed that it has entered into a definitive agreement to acquire a clinical workflow software solutions provider to the healthcare industry, Provation Software, Inc., from Clearlake Capital Group, L.P. for $1.425 billion. The deal is likely to close by the end of the year.

Following the news, shares of the company appreciated marginally to close at $74.53 on Friday.

Fortive is likely to finance the deal with short-term debt and available cash. Further, the company expects the deal to be accretive to adjusted diluted net earnings per share by greater than $0.08 in Fiscal Year 2022.

Implications of the Deal

With over 5,000 customers and expected revenues of about $110 million in 2021, the addition of Provation’s unique solutions to enhance clinical productivity, care coordination, and reporting and billing accuracy is expected to be value accretive to Fortive.

Management Commentary

The CEO of Fortive, James A. Lico, said, “We are extremely excited to announce the pending addition of Provation to the Fortive team. This acquisition will bring extensive software development expertise and innovation capabilities to the AHS segment, significantly accelerating our segment strategy to provide critical workflow solutions for hospitals and ASCs.”

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Price Target

Recently, Loop Capital Markets analyst Scott Graham initiated coverage on the stock with a Buy rating and a price target of $90, which implies upside potential of 20.8% from current levels.

According to the analyst, the company’s legacy industrial operations with high margins combined with a thrust towards connectivity give it a strong footing. Further, the sales strategies bode well for the company in the long term.

The Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 5 Buys and 3 Holds. The average Fortive price target of $84.50 implies that the stock has upside potential of 13.4% from current levels. Shares have gained 7.4% over the past year.

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