Ann: ResMed to Acquire Brightree, page-28

"Maybe you dismiss this sort of opinion because you prefer your own research, but I've highlighted some sections of the SA article that to me, make a lot of sense about the future of RMD including Bt."

Unlike you - who evidently appears uncomfortable in doing so - I am happy to canvass and listen to any opinion, especially opposing opinion, when it comes to the investments I hold.

In fact, I welcome it.

And the more contrary any views are relative to my own, the more valuable they are to me.

Because I love my money too much to let is be subject to only my personal biases, so I yearn for people to stress-test my investment process by pointing out what they think are flaws in my thinking.

In fact, what I don't welcome when I own a stock is to encounter people who act a blinkered cheerleaders, actively choosing to ignore any potential pitfalls or ambushes. That adds no value.

So, while I do indeed invest completely independently of any financial advisor, that doesn't mean I don't read and listen as widely as I can, so thank you for posting that opinion from seekingalpha.com.

Trouble is, that article does nothing to convince me that Brightree is the same sort of business as Resmed, and that Resmed has made a really astute, value-accretive acquisition here.

Heck, it doesn't even say what specifically it is that Brightree does, other than in disconcertingly vague business jargon ("digital health", "post-acute care", "healthcare informatics offerings", "connected care", "partnering", "big data"), the very sorts of phrases that investment analysts and financial journalists use to sound knowledgeable.

Where is the detail on exactly how Brightree fits in with Resmed, other than in broad, un-quantified execu-speak terms such as "complementary", "potential", "partnering", and "solid financial deal"?

What does this deal bring to Resmed, other than higher Revenues and EBITDA, for which Resmed has paid up most handsomely?

The arguments put forward by the proponents of this deal are all way too fuzzy for my liking. Where is the detail?

(And don't get me started on when people make use of financial engineering techniques to justify things - in this case, the lofty acquisition multiple is reduced by tax benefits... that kind of thing is always an alarm bell going off in my head)



Let me state again something that no one has cared to refute:

Resmed is the world's leader in the rapidly-growing field of sleep disorder diagnosis and treatment. Resmed spends more on R&D in this field than the rest of its competitors combined. Consequently it has industry leading technology and has a demonstrated track record of generating returns for shareholders over an extended time frame.
This is what we, as shareholders, own.

Brightree, on the other hand, is a "provider of cloud-based software to improve clinical and business performance in the post-acute care indsustry. The company serves the HME, home health, orthotic and prosthetic, HME pharmacy, home infuson and rehabilitation home care segments. Brightree's solution follow the natural workflow of providers to automate and improve how they manage their businesses, serve patients and protect reimbursements".
(From the Form 8-K submitted to the NYSE).

Those two business models sound very, very different to me.

One company does sleep disorder (extremely well) and the other writes software (presumably very well, too) for other businesses to manage their billings, revenue cycle, work-in-progress and general business administration and management.

Do those sound like remotely similar commercial activities to you?

Like I said, that they both operate in the "health space" doesn't quite cut it as businesses that are not unrelated.

(Why, plumbers and electricians both operate in the construction space, but that doesn't therefore necessarily make them the same businesses, or even complementary to one another, for that matter.)


What the article does tell me, however, is that Brightree's business is something that Resmed would increasingly like to get involved with. Which is stating the obvious anyway, because Resmed have committed a cool eight hundred big ones for the privilege of doing so.

And that I am not totally ambivalent with Resmed wanting to "diversify" (the CEO's words, not mine) is a moot point. (When you have the best business in town, it stands to reason that any other business you bolt onto that preeminent business, will end up diluting it.... di-worse-ification, if you like)

Sure, being a high IP sort of business, writing business management software is likely to be a capital-light undertaking and therefore likely to generate high rates of return on capital.

And if that's what my company wants to do, then - as a shareholder - I would want that "diversification" strategy to occur with negligible amounts of my capital being put at risk, just in case the diversification venture failed. I sure don't want to see some smart guys smiling as they sailing off over the horizon with $800m of my money stowed away on their expensive yachts.


"...but they clearly indicate the potential for positive synergistism,"

I have followed a great many different companies embark on a great many different acquisition forays, citing all sorts of reasons why the acquisition(s) in question made sense.

One thing I have all too frequently noticed with a high degree of correlation: when the word "SYNERGIES" is used as part of the justification for said acquisition(s), those acquisitions turn out to be either dismal failures, at best, or outright disasters.

"Synergies", in my long experience is often an anathema to a successful acquisition outcome. For so often, one, two or three years down the track, those "synergies" are unable to be verified.

The word "synergies" should be outlawed from the lexicon of corporate executives, in my opinion.


"Also, "you don't run you engage" (whatever that means) OK but it sounds like you're trying hard to convince others to short RMD?"

By engaging I mean I send the chairman of my (our) company some correspondence, outlining my concerns as a long-term and loyal shareholder, and respectfully requesting some clarity on a list of considered points that I raise. Which I did last week.

And I speak to friends and associates who I know follow Resmed, either as fellow shareholders, or not, to exchange views with them.

And I also - heaven forbid - attempt to initiate dialogue on online forums such as HotCopper which is after all, designed for the very purposes of discussing and debating all aspects of investing in publicly listed companies.


As for me sounding like I am trying hard to convince others to short RMD, that inference is nothing short of puerile and I'll treat it with the sheer contempt it deserves.

Can you point out to me where - in anything I have written on RMD - I have even made the faintest of suggestions as to what people should do when it comes to investing in RMD?

I'll remind you that it is me that has been subject to exhortation from another poster to sell my shares.


In closing, I make no apologies for my passionate objections to this transaction, those objections apparently causing you a degree of discomfort.

But I take my investing very seriously.

Far too seriously to simply say, "Oh well, if management and a few financial commentators says it'll all be OK in the end, then that's good enough for me."