VIPS sold by parent to New York company Towson software firm will be independent

all workers to remain

Acquisitions

October 09, 1998|By M. William Salganik | M. William Salganik,SUN STAFF

VIPS Healthcare Information Solutions, a Towson software and consulting firm, became a free-standing company yesterday after being sold sold by its parent, First Data Corp.

Jenny G. Morgan, president and chief executive officer of VIPS, said she and all 240 employees will remain. Terms of the deal were not disclosed.

Cornerstone Equity Investors LLC, of New York, acquired a controlling interest in VIPS. "Our intention is to keep the company independent and use it as a base for growth," said Stephen Larson, a managing director of Cornerstone. Eventually, said, Cornerstone hopes to take VIPS public.

Founded in 1984, Cornerstone, which reports $1.2 billion in committed capital, has completed 80 transactions and 24 initial public offerings. Among its "portfolio companies" -- those in which it has held or holds a significant stake -- are specialty retailers including FAO Schwarz toy stores and Sunglass Hut.

Larson said Cornerstone also concentrates in health and technology, and had been looking for a company that combined those areas.

First Data, primarily in the business of electronic commerce, picked up VIPS in 1995 in a deal in which it also acquired Western Union and TeleCheck, the world's largest supplier of check guarantee and verification services. While those fit with its other businesses, First Data said in its most recent annual report, the deal "also brought several businesses where the strategic fit was less clear."

Colleen Emigh, First Data vice president for corporate communications said, "First Data's focus is on transaction and information processing. For the last 18 months, we have been exiting the health care sector."

And, with about $30 million in annual sales, VIPS was hardly a key part of First Data. The Hackensack, N.J.-based First Data has sales of more than $5 billion a year.

Larson said First Data had its investment bankers talking about VIPS with a small group of health information companies, "and we kind of shoe-horned our way in."

Morgan said as First Data sought a deal, VIPS management "played a very active role" and was hoping to be acquired by an investor rather than absorbed into a larger health data firm.

"Being independent now opens our ability to look at acquisition strategies to grow," Morgan said. Even without acquisitions, she said, VIPS hired 48 people in the past year and remains "in a major, constant recruiting mode" to consultants, programmers and "clinical health care talent."

Its major product lines are software for Medicare claims processing, a software system to check for billing fraud and an information system for managed care companies.

Morgan and Larson will serve on VIPS' new board of directors, along with a director from Cornerstone and one each from First Data, which will retain a 10 percent stake, and NationsBank, which will have an ownership share. VIPS management will have a stake as well.

"Down the road," Larson said, "we want to bring in qualified outside directors and position the company to go public." VIPS, founded in 1979 as a private company and later as a division of First Data, has never disclosed financial data, but Morgan said VIPS is profitable.

Pub Date: 10/09/98

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