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Healthcare IT M&A Sees Increase in 2014

A recent report by Berkery Noyes, an independent mid-market investment bank, has found that healthcare mergers and acquisitions (M&A) have consisten...

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|Aug 5|magazine8 min read

A recent report by Berkery Noyes, an independent mid-market investment bank, has found that healthcare mergers and acquisitions (M&A) have consistently been on the rise in 2014, garnering an aggregate value of $5.45 billion.

The report analyzed M&A activity during the first half of the year and compared it with four previous six-month periods from 2012 to 2013 and included information and technology companies that service pharmaceutical, healthcare payer and healthcare provider spaces.

Total deal volume increased 18 percent since the second half of 2013, with the median revenue multiple decreasing from 2.5x to 2.0x over the past six months. Deal volume in the healthcare IT segment increased by 17 percent, from 65 to 76 transactions, making it the largest increase on a half year basis throughout the past two-and-a-half years, the report stated.

“In the rapidly changing healthcare information/technology marketplace, both strategic and financial buyers are on the hunt for attractive acquisitions of scale,” said Tom O’Connor, Managing Director at Berkery Noyes, in a news release. “Companies with good scale, recurring revenue, and high growth rates with a large addressable market opportunity, whether they are long term care information/education/technology providers, revenue cycle management, point-of-care information solutions, or one of many other attractive niches, are in high demand from both private equity and strategic buyers.”

“Financial buyers also have over $500 billion of dry powered which they can leverage 4x-8x times. It is a seller’s market as with all the attractive dynamics noted above there remains a lack of quality assets of scale available so any attractive assets commands high valuation and multiple buyers,” added O’Connor.

Additional markets covered in the report included pharma IT, which saw a volume increase from 15 to 24 transactions. The largest deal in both the segment and overall industry was Dassault Systemes’ acquisition of Accelrys Software, a provider of scientific lifecycle management software for chemistry, biology, and materials research, for $652 million. Consumer Healthcare increased from 16 to 21 transactions and the healthcare Business Services segment improved from 44 to 49 transactions.

“A broad range of information, data, technology, knowledge management solutions, and services are leading to end-to-end offerings for the pharmaceutical, biotechnology, and life sciences industries. Evidence-based marketing is a key trend in this segment, with its emphasis on data, science, pharmacoeconomics, and comparative effectiveness,” said Jeffrey Smith, Managing Director at Berkery Noyes.  

“We expect to see continued robust new business formation in the life sciences commercialization space, with an emphasis on proprietary intellectual property assets, new software analytics, regulated content solutions, patient engagement, mobile, and global platforms,” added Jeffrey Smith, Managing Director at Berkery Noyes.