UnitedHealth Group's £1.24 Billion Acquisition of EMIS Health
Deal Overview
Acquirer: UnitedHealth Group Inc
Target: EMIS Health
Total Transaction Size: £1.24 billion
Closed Date: 27 October 2023
On 17 June 2022, an affiliate of Optum Health Solutions, UnitedHealth Group’s UK-based operations arm, reached agreement with the board of EMIS on the terms of an all-cash offer for the entire issued and to-be-issued ordinary share capital of EMIS. The acquisition of EMIS was valued at approximately £1.24 billion, with each EMIS shareholder entitled to receive £19.25 per share in cash.
Andy Thorburn, CEO of EMIS, emphasised belief that the deal would provide resources and expertise to support the NHS through technology innovations. Rob Sergeant, CEO of Optum, asserted that the acquisition would bring more advanced technology solutions and capabilities to improve patient care within the NHS.
The deal was structured as a court-sanctioned scheme of arrangement, under Part 26 of the Companies Act 2006, which allows for UK public company takeovers after (75%) approval from both the relevant shareholders and the High Court. This method, rather than a contractual offer, allows the acquirer to acquire 100% of the target under a court-supervised process to ensure procedural fairness for involved parties. On 9 August 2022, the Court Meeting and General Meeting approved all necessary resolutions. The acquisition was entirely funded by UnitedHealth’s existing cash resources with no debt financing required.
Company Details: Acquirer – UnitedHealth Group Inc
UnitedHealth Group, founded in 1977, is an American healthcare insurance and health data analytics conglomerate - the largest health insurance company in the US by market share and revenue. The group operates in the UK via Optum Health Solutions Ltd, which provides support services including medicine optimisation software (Scriptswitch), population health management and data analytics. Optum - Bordeaux UK Holdings II Limited (Bidco) - has existed in the UK healthcare market since 2002 and is currently an accredited supplier on multiple NHS framework contracts, including the Health Systems Support Framework, which provides NHS organisations access to services supporting integrated care models based on population health management. Over the past 23 years in the UK healthcare market, Optum has established itself as a vital technology and analytics partner for the NHS, with its business model placing a clear emphasis on embedding within the NHS' operational infrastructure rather than competing with NHS providers.
Their stated rationale for the acquisition is to facilitate the sharing of expertise between the companies to help the NHS strategically and make health systems work better within the UK. Of course, the acquisition also represents an expansion in UnitedHealth’s ambitions regarding the UK market in healthcare data and digital infrastructure.
Company Details: Target – EMIS Health
EMIS is a UK-based healthcare software business founded in 1987 by 2 GPs. It largely supplies IT solutions and data management systems to the NHS, most notably EMIS Web - an electronic patient record system (EPR) used by most NHS GPs nationally - and EMIS-X Analytics which allows users to conduct data analysis. It is one of the largest suppliers of clinical systems in the UK, playing an integral role in the digital infrastructure of the NHS. However, recent and increasingly frequent outages in 2023 created significant disruption to GP surgeries nationally - with a Pulse report of NHS outages between April and June showing there were around 25 in 2 months all from EMIS systems.
Their stated rationale for the acquisition was to allow ‘accelerated value to customers’ due to increased access to resources and pursuit of new valuable projects with the investment of UnitedHealth.
Legal Contentions and Impact (Competition & Data Protection)
The CMA’s primary concern was whether the proposed acquisition would reduce competition in the UK healthcare technology market. Given EMIS’ prevalence within the NHS infrastructure and digital healthcare data market, there were initial concerns about Optum’s use of EMIS’ EPR system and whether this would be restrictive for competitors.
In January 2023, the CMA formally commenced their Phase 1 investigation. In response to these concerns, Optum offered to divest its Medicines Optimisation and Population Health Management business units in the UK to maintain competition, but this remedy was deemed insufficient by the CMA for not addressing the core issue of restricting access to data. This data-centric approach reflects the UK’s evolving approach to competition law, recognising how control of sensitive data can be utilised to create market power independent of pricing effects.
Consequently, in March 2023, the acquisition was referred for an Phase 2 investigation. After analysis of extensive evidence, including various internal documents, competitor and customer submissions, and input from NHS England, the CMA provisionally cleared the deal in August 2023 and ultimately provided final clearance on 29 September 2023. Its conclusion was that Optum would be unlikely to restrict rivals’ access due to limited potential profitability and that the NHS could use its ‘oversight role’ to prevent this strategy if it arose. While this oversight is certainly important, CMA delegation of enforcement to a resource-constrained organisation facing multiple priorities may not be sustainable; future deals of this nature may benefit from the imposition of structural safeguards instead.
The acquisition additionally raised broader data protection and privacy concerns, particularly given the somewhat cross-border nature of the deal. In particular, the use of patient data and data protection compliance under UK GDPR and the Data Protection Act 2018.
EMIS currently holds electronic patient records for over 40 million UK patients, more than half England’s population, which constitutes “special category data” under GDPR. This imposes heightened protections for health information and requires explicit legal bases for processing. EMIS therefore operates as a “data processor” and processes patient data solely under the instructions of the relevant NHS organisations. The role of an American multinational company in this deal raised risks and concerns regarding this existing processing agreement. However, these were mitigated by two main things; EMIS remained a distinct UK-registered legal entity subject to ICO jurisdiction and its processing activities continued to be governed by the relevant UK legislation despite the change in ownership. UnitedHealth's liability is comparatively limited to its equity investment with no regulatory obligations.
Notably, neither the CMA nor media indicated that Optum undertook any binding obligations on data localisation or restrictions of cross-border transfers to facilitate the deal. This suggests that the existing protections of data under the GDPR were deemed sufficient.
Future Implications
It is evident that the CMA will scrutinise M&A deals where control of significant data could impact competition in adjacent markets, even if the parties are not direct horizontal competitors. The outcome here additionally highlights that, with regards to the UK healthcare market, competition authorities view NHS governance and existing contractual arrangements as substantial and active safeguards against anti-competitive behaviour.
Future bidders for UK-US health deals can expect a requirement to provide detailed evidence on incentives, NHS contractual arrangements, and continued operation of provided systems to demonstrate that restricting competitor access to data or systems would be irrational. The deal can be seen in the context of expanded UK merger-control under the Digital Markets, Competition and Consumers Act which facilitates CMA review of vertical and conglomerate deals with a “UK nexus”.
The decision lowers immediate regulatory barriers for deals of this sort, establishing that foreign ownership of crucial domestic infrastructure is acceptable with the existence of certain safeguards. Nonetheless, evidentiary requirements are raised by this deal - while this increases the transactional burden for the parties involved, the net effect is lower regulatory risk for acquirers going forward if they provide the requisite evidence.
Conclusion
Overall, this £1.24 billion deal between UnitedHealth and EMIS reflects strategic and deliberate efforts to strengthen the existing digital infrastructure landscape of the NHS and promote innovation within UK healthcare technology markets. From a regulatory perspective, the CMA’s ultimate approval demonstrates a nuanced, though ultimately permissive, attitude towards foreign ownership of critical domestic data - going forward companies should be prepared to extensively demonstrate their incentives with this data to ensure no restrictive behaviour and no breaches of data protection compliance. To end, it is prudent to note that the CMA regarded NHS oversight as key in constraining potential competition and market abuses; it remains to be seen whether this will actually be the case or whether structural conflicts of interest will gradually foreclose competition.
References
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