Employees at Practice Fusion expected IPO riches, but got nothing as execs pocketed millions

Internally, a very different story was unfolding. After several years of missed targets and a management shake-up that resulted in the ouster of founder and CEO Ryan Howard, the board was quietly looking for a way out.

Confidential documents obtained by CNBC reveal that the board had started seeking a potential buyer in November 2015, several months before the Times report, and had hired Evercore to help it solicit interest. As many as 40 potential buyers were contacted, with bids ranging from $50 million to $225 million — a fraction of its desired IPO valuation.

Financial statements show that the company was well shy of the financial metrics reported by the Times and that the business was starting to decline. Following a revenue jump of 70 percent in 2015 (the final year of Howard’s tenure), growth slowed to 13 percent in 2016, closing the year at about $54 million. Through the first nine months of 2017, sales declined 10 percent from the same period in the previous year — from $37 million to $34 million.

The company didn’t respond to requests for comment.

Practice Fusion was also downsizing. The company eliminated one-quarter of its workforce — 74 people — in February 2016. But Beth Seidenerg, a director and Kleiner Perkins partner, told TechCrunch that there was no cause for alarm. CEO Tom Langan described the move as necessary to get the company to a profit, at the same time that low-priced acquisition offers were starting to accumulate.

At its peak under Howard, the company employed more than 400 people. It’s now down to about 200 employees, sources said.

The highest offer Practice Fusion received came in May 2017 from its eventual buyer, AllScripts, which was proposing $225 million to $250 million, according to the confidential documents. That deal fell apart after the news broke that a company in the same space, eClinicalWorks, had misled customers about the certification of its health IT software, resulting in a $155 million settlement and a $1 billion class-action lawsuit.

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