Auxilio Acquired CynergisTek for $34 Million in Combination of Stock, Cash, Seller Notes and Earn-Out

In January this year Auxilio Inc. (OTCQB: AUXOD), a provider of complete document workflow solutions and IT security services, made its 3rd acquisition with the purchase of 100% stock of CynergisTek Inc., a privately held healthcare IT security firm, in a deal worth $34 million. The deal consists of $14 million in cash, 1.17 million shares of Auxilio shares, $9 million worth of promissory notes, and an additional $7.5 million earn-out to be paid over next 5 years based on certain financial criteria being met.

Founded in 2004, Austin, TX based CynergisTek Inc. is an information privacy, compliance and cybersecurity consulting firm serving hospitals and healthcare organizations. Post-acquisition, CynergisTek will continue to operate independently as a wholly owned subsidiary of Auxilio and CynergisTek founders, Michael McMillian and Dr. Michael Mathews, will take Board positions in the combined entity and assume continued leadership positions. McMillian will take on additional role as President and Chief Strategy Officer of Auxilio, while continuing as CEO of CynergisTek.

With about $15 million in revenues and $5 million of EBITDA, CynergisTek Inc. was acquired for a 2.30 revenue multiple and 6.80 EBITDA multiple.

Since 2004, Auxilio, based in Mission Viejo, CA, has been serving healthcare organizations providing complete document workflow solutions and IT security services. The firm analyzes the document continuum uncovering opportunities to optimize workflow and secure PHI that greatly reduces costs and improves operational efficiency.

In 2014, Auxilio acquired Delphiis, an information security consulting and SaaS technology company followed by acquisition of Redspin, a HIPAA risk assessment and penetration testing provider to complement the existing consulting services. Now with the acquisition of CynergisTek, the combined entity plans to align service offerings and provide comprehensive information management solutions designed to mitigate risk, optimize productivity and enhance savings for healthcare organizations.

To fund the cash portion of the acquisition, Auxilio entered a 5-year term loan from California Bank & Trust and Avid Bank at a rate of Prime plus 1.50%, which will be due in January 2022.

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Sources:

http://www.nasdaq.com/press-release/auxilio-has-acquired-healthcare-it-security-solutions-leader-cynergistek-for-up-to-343-million-20170117-00882

http://www.careersinfosecurity.com/interviews/cynergistek-gets-new-owner-ceo-explains-deal-i-3448

https://www.sec.gov/Archives/edgar/data/1011432/000144586617000038/auxo8k01172016.htm