TUC, CareWorx: Inside the MSP HealthTech Merger
When TUC Managed IT Solutions and CareWorx confirmed their merger plan earlier this week, it was the first step in a larger strategy for the MSP and the senior care IT provider. In addition to rebranding the entire business as CareWorx, CEO Mark Scott is preparing to raise more money — and he’s on the hunt for more acquisitions.
In a call today with ChannelE2E, Scott describe a three-year journey that ultimately triggered the TUC-CareWorx merger. The result is a 130-person company with several unique managed, cloud and vertical market services.
While the healthcare vertical has been compelling for several years, betting the entire business on managed IT for hospitals or physician offices didn’t seem practical to Scott.
Finding the Right IT Market Segment
Among Scott’s initial concerns about the heathcare vertical: Hospital networks often prefer to work with larger integrators. And physician offices typically run on numerous different EHR (electronic health record) systems. In stark contrast, the senior care segment of the healthcare market looked far more attractive to Scott. Among the reasons:
- Pure demographics suggested IT demand for senior care facilities would skyrocket amid the aging population.
- Moreover, a key software platform — called Point Click Care — was emerging as a potential de facto standard in the senior care sector.
“Our goal was to find a market that’s underserved, and then see if that market has a dominant ISV,” says Scott. Senior care coupled with Point Click Care seemed to be that ideal market opportunity. Adding to the intrigue: CareWorx was one of Point Click Care’s top partners, helping senior care facilities to deploy a range of wireless medical applications in recent years.
Call it coincidence or serendipity, but TUC and CareWorx had a VP and a CTO who went to high school together. So opening a line of communication between the two companies was a natural step. The two companies gradually began to work on various engagements together roughly 18 months ago. At the same time, Scott had his eye on a potentially bigger relationship.
In addition to a strong business focus, CareWorx brought strong talent to the table. For instance, CareWorx CEO Mark Tomzak — now president of the merged company — is considered a subject matter expert in the senior care IT field.
Mark Scott, meanwhile, is a veteran of the MSP market and the software companies that serve it. More than a decade ago, he was CEO of N-able Technologies, the RMM (remote monitoring and management) software provider that SolarWinds ultimately acquired for for $120 million in 2013.
If Scott could rewind the clock, he would do at least one thing differently during those early days of N-able. Specifically, he would have pulled institutional investors and partners into the conversation earlier.
Lining Up the Financing
Based on that lesson, TUC has been working with Canacord Genuity for the past six months or so. Canacord helped TUC to strengthen its story and shape its business model. Although TUC is privately held, Scott says the company runs as if its a public entity — built with the proper governance, strategic plan and financing in place. TUC’s board also includes the CFO of a public company, bringing added financial scrutiny and expertise to the conversation.
Still, the TUC-CareWorx deal needed even more financial muscle. That’s where Wellington Financial enters the picture. Wellington provided a $10 million credit facility that helped TUC acquire CareWorx. The facility also helped to pay some of CareWorx’s early investors, who took money off the table as part of the merger.
So what’s next? TUC and CareWorx will unify under the CareWorx brand by about June or July 2016. At the same time, Scott is already talking with financers about more potential funding. And he’s studying about six companies for potential acquisition.