Lockheed Acquires Systems Made Simple

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Oct 31, 2014

Lockheed Martin (LMT, Financial) announced yesterday that it had entered into a definitive agreement to acquire Systems Made Simple, a leading provider of health information technology solutions to the U.S. federal government. The officials of both companies were mum on the deal. With not much disclosed about the terms of the deal, the acquisition is expected to be completed by the end of next month. Once the transaction is closed, the company will report through the Corporation’s Information Systems & Global Solutions business area.

Management Comments:

“Technology is rapidly transforming the healthcare landscape in the United States, and is critical to reducing costs and improving patient care,” said Lockheed Martin Chairman, President and CEO Marillyn Hewson. “Systems Made Simple’s capabilities in engineering health technology solutions are a natural extension of our existing health IT portfolio, and will enable us to deliver a broader portfolio of capabilities to meet our healthcare customers’ current and future needs,” she added.

Systems Made Simple delivers technology and service solutions to improve, increase, enable and ensure the secure exchange and interoperability of information between patients, providers and payers. The company does significant work with the Department of Veterans Affairs (VA) in areas such as health data analytics, data center operation, health data management and health system interoperability. The company operates in the fastest growing part of the U.S. federal IT budget and was selected for the Transformation Twenty-One Total Technology (T4) contract that supports the VA’s IT modernization initiatives, a contract that Lockheed Martin is not currently involved in.

“Lockheed Martin and Systems Made Simple share a common technology vision and a common commitment to our nation’s veterans,” said Al Nardslico, Systems Made Simple Chairman and President. “We are proud to bring our collective experience to deliver more robust healthcare solutions to the men and women who have served our great country.”

Prospects Of The Transaction:

This transaction will broaden Lockheed Martin’s capabilities across the spectrum of health IT operations – from developing sophisticated IT architecture for complex organizations to delivering custom applications designed to increase patient access and improve the overall patient experience. It will also expand Lockheed Martin’s relationship with the Department of Veterans Affairs, for which it provides IT-enabled disability case management services for veterans. The deal is Lockheed’s seventh acquisition of the year and marks another purchase in the health care technology market, which many defense contractors see as a lucrative investment area.

The analysts predict that the deal will add to the company the ability to develop electronic health records for the VA, and improve medical information-sharing between the VA and the Pentagon. The federal health care market is viewed by many contractors as a bright spot in an otherwise slow federal spending environment. Many government agencies are looking to overhaul their health care systems, including the VA. Lockheed’s other acquisitions this year have been in the energy and commercial space sectors, such as the purchase of Massachusetts-based Sun Catalytix or Texas-based Astrotech Space Operations.

To Conclude:

The purchase of Systems Made Simple is part of Lockheed’s strategy to grow within the highly competitive federal health IT market, said Horace Blackman, vice president of Lockheed’s health and life sciences sector. Profits at Lockheed rose in the third quarter, but sales decreased slightly from the same period a year ago, the company reported last week. Lockheed’s profits were boosted by higher sales of the F-35 stealth fighter jet as a result of changes in the federal pension law. The transaction, the experts say, is going to bolster LMT’s growth in general.