Cognizant has acquired TriZetto Corporation, a provider of healthcare IT software and solutions, for $2.7 billion.
“Healthcare is undergoing structural shifts due to reform, cost pressure and shifting responsibilities between payers and providers. This creates a significant growth opportunity, which TriZetto will help us capture,” said Francisco D’Souza, CEO of Cognizant.
In August, Cognizant said it’s adopting a more conservative stance for the remainder of the year and revising revenue guidance to at least 14 percent for 2014.
The revised guidance was due to weaknesses in certain clients and longer-than-expected sale cycles for certain large integrated deals, said Cognizant.
Cognizant in health care
Last month, Cognizant said its Q2 revenue rose 19.2 percent in health care, which consists primarily of payor, pharmaceutical and medical device clients.
After a significant increase in investments last year, many of its payor clients are taking cautious approach to incremental spending in 2014, especially associated with their activities with public and private health insurance exchanges, said Cognizant.
Cognizant said its $2.7 billion IT services deal with Health Net, a top 10 managed care organization in the U.S., is the single largest PCB deal in the history of Cognizant. Health Net provides and administers health benefits to 5,800,000 members in the U.S.
Cognizant today said it will be able to accelerate its market position and strategy of delivering healthcare software and solutions to clients.
The integrated portfolio of capabilities across technology and operations will position Cognizant to help clients drive higher levels of operational efficiency.
TriZetto brings approximately $1.5 billion of potential revenue synergies cumulatively over the next five years.
3,700 employees of TriZetto will be part of Cognizant’s existing healthcare business, which serves over 200 clients, including 16 of the top 20 U.S. health plans and 4 of the top 5 pharmacy benefit management companies.
Healthcare currently represents approximately 26 percent of Cognizant’s revenue.
Cognizant and TriZetto have a long-term relationship, having jointly served a number of healthcare clients to date.
The all-cash acquisition represents an opportunity to integrate services across three horizons — traditional IT services; high-growth businesses such as management consulting, business process services and IT infrastructure services; and emerging delivery models.
The transaction is expected to close in the fourth quarter of 2014.