Deal Spotlight: Digitize.AI acquired by WayStar


Edgemont Partners Managing Director, Kojo Appenteng, sat down with Digitize.AI Co-Founder and CEO, Justin Adams, to discuss insights from the successful sale of his disruptive HCIT business in the Revenue Cycle Management (RCM) market.

Digitize.AI, a provider of artificial intelIigence-powered systems for prior authorizations, was recently acquired by RCM technology company Waystar. Prior authorization is largely a manual process within RCM workflows that is both time-consuming and prone to errors, resulting in an estimated $30bn annual cost in wrongful denials, inefficiencies and clerical errors. Digitize.AI’s intelligent systems empower faster and lower cost prior authorizations.

Q: Tell us about the evolution of Digitize.AI and what factors prompted you to look for a sale?

We evolved very quickly. Digitize.AI didn’t in fact start as a healthcare company – our backgrounds were in payment processing and back office automation – but we had a sense that our technology could work well in healthcare. We learned about revenue cycle management and prior authorizations for the first time when we met with the CFO at Emory Clinic and asked her about Emory’s biggest pain point. As we learned more, we developed a pilot with Emory and designed the solution while embedded with them, to optimize the user experience.

Fast forward two years, and we had acquired more clients and had to choose how we would pursue further growth. On the one hand, we had more market interest in the solution than we had operational capabilities, and on the other hand, we faced long sales cycles with other prospective healthcare clients. We believed our technology gave us a first-mover advantage, and we wanted to make the most of it. At that point, we had two options: raise a ton of venture capital money or join with a strategic partner. Venture capital can give you a longer runway but it doesn’t shorten the sales cycle – we would still be doing hand-to-hand combat for every new client. It was more attractive for us to find a strategic partner with established healthcare relationships and contracts that we could leverage to quickly get our technology into as many hands as possible.

Q: How did you navigate the market landscape to pursue the sale process, especially given the heightened level of M&A activity across the healthcare industry?

We wanted to design a structure that would allow us to be entrepreneurial and maintain operational authority over the business, while leveraging the resources and scale of a more established player in the industry. Finding the right partner for that structure was an important aspect of the deal.

At the peak of the process, we had around a dozen interested parties, and Kojo, you were a great resource to make sure that we found a good strategic fit and could showcase our disruptive technology to buyers that would recognize its value. Edgemont helped us identify the major revenue cycle management players in the market, and which of those prospects are technology-focused and would be a good fit for Digitize.AI. Waystar was a good fit because like Digitize.AI, they are 100 percent focused on technology.

Q: In your view, what is most helpful about having an advisor when pursuing a sale?

I had never sold a company before. I did not know what the timeline of the sales process should be and how to avoid the common pitfalls. And I still needed to run the business. So, Kojo, it was important to get your help in qualifying potential suitors – which ones were really interested, and which ones might be simply “kicking the tires” or using the process as a kind of market research. It was also helpful to get advice on staging the release of information to prospects so we could engage with the proper caution.

When we started to talk through term sheets, it was helpful to get Edgemont’s advice on the progression of the negotiation and your guidance on which terms we should prioritize. Of course, we wanted to maximize value for Digitize.AI, but since we were intending to stick around and continue to build the business, we didn’t want to maximize to the point of it not being a win-win for both us and the buyer. It helped us structure a good deal for everyone.

Q: As the CEO and Co-Founder, what were some of the biggest challenges you faced during the process and how did you overcome it?

The biggest challenge was trying to balance the demands of the acquisition process with running and growing the business the right way. Both were full-time jobs and I didn’t want my team distracted. There were so many things that had to come together once we had broad agreement on a deal, and we did it on a very tight schedule, so I leaned on my teams and advisors to get us to the finish line. Overall, it was a great experience working with you, Kojo. I received high-quality advice and guidance in a low-pressure way. I always felt that Edgemont had our best interests at heart.