How Michael Ferro Made $175 Million on a Tech Investment

 

When Michael Ferro focused his efforts on tech investments in the Chicago area, one of the first companies he looked at was Merge Healthcare. This was after he sold Click Commerce to Illinois Tool Works Inc. in late 2006 for $292 million in cash. Michael Ferro founded Click Commerce when he was only 28 years old. He was a software technologist who saw an opening to better facilitate buying and selling transactions among businesses on the internet. The company ended up being huge success.

 

Now Michael Ferro needed a new challenge, and Merge Healthcare was it. Along with his Chicago-based investment firm, Merrick Ventures, Michael Ferro saw potential in Merge Healthcare, a Chicago-based health tech company, and wanted to turn it around.

 

Although Merge Healthcare was in heavy debt and on the brink of collapse, Michael Ferro invested $15 million in the company in 2008 and served as chairman. After just seven years, the company was in a very different place. In 2015, IBM agreed to purchase Merge Healthcare for $1 billion, which provided the health-tech company with the branding and funding necessary to compete and change the medical industry.

 

According to the agreement, IBM also assumed $207.5 million in Merge’s debt. Its investment gave hospitals and potential customers the assurance that the company would not go under or be able to meet its promises. IBM purchased Merge Healthcare for its advanced storage management technology, patent portfolio that Michael Ferro helped to develop, and its database of more than 30 million images.

 

When the acquisition was made, analysts said that IBM would benefit from the move because Merge’s medical image storage management technology could be used with its Watson Health platform. This merger would help doctors find patterns that would allow them determine the best treatment options for their patients. Watson’s data was limited to text files, so Merge’s technology enabled providers to store and exchange medical images. Additionally, Michael Ferro developed AI medical imaging technology that would further improve IBM’s healthcare solutions.

 

With the sale, Michael Ferro made more than a tenfold return on his $15 million investment as his stake in the company was valued at more than $190 million. This sale to IBM would be one of Michael Ferro’s and Merrick Ventures’ biggest success stories for investing. Michael Ferro still remains at Merrick Ventures, the private equity firm he founded, to this day.

 

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