On May 2nd 2022, CSI made its largest acquisition in history acquiring Allscripts’ Hospital EHR business for $725m. The transaction was financed with ~50/50 debt and equity, making Allscripts the second LBO conducted internally at CSI after Acceo in 2018. 

As we’ve previously discussed, increased competition and the law of large numbers is pushing CSI into acquiring larger assets. In 2023 YTD, CSI has deployed a record $1.9bn into acquisitions, with $1.4bn into assets with an enterprise value over $200m. This includes Orbis Blue for $700m, Wide Orbit for $500m, and $200m for Empower.

We’ve spent 6+ hours interviewing Former Allscripts and Altera executives to understand drivers of Altera’s Y1 performance and the long-run opportunity in larger acquisitions. 

In its first year of ownership, CSI has generated $104m in FCF at Altera, a Y1 ROE of 26.5%. However, our primary research suggests there are two fundamental reasons why Altera’s 10-year IRR may hit the lower-end of forecasts:

1. Higher than expected customer churn 

2. CSI’s operational playbook less effective than usual

This analysis shares our learnings and explores Altera’s challenges in more detail.