Health IT M&A activity drops, value rises slightly

The number of merger and acquisition deals among healthcareIT/pharma companies declined 16 percent in 2013, but the value of deals rose, according to analysis from Berkery Noyes, an independent mid-market investment bank.

The number of deals dropped to 324 from 387 in 2012, but remained 3 percent higher than in 2011, according to an announcement. Total transaction value rose 2 percent in 2013 to $11.81 billion.

BC Partners' acquisition of Springer Science & Business Media for $4.42 billion accounted for more than one-third of the industry's aggregate value in 2013. Experian's acquisition of Passport Health Communications for $850 million in the revenue cycle management subsector was the largest deal in healthcare IT. Constellation Software was the most active health IT acquirer with five total transactions in 2013.

Meanwhile, the number of deals in pharma IT increased 45 percent, from 22 to 32 transactions.

Berkery Noyes tracked 1,027 deals between 2011 and 2013, of which 248 disclosed financial terms, and calculated the aggregate value to be $27.85 billion. It projected values of 779 transactions with undisclosed terms to be $6.04 billion, making a total value of $33.88 billion over the past three years.

"In today's hyper competitive HIT marketplace, companies with good scale, recurring revenue and high growth rates, whether they are revenue cycle management, point-of-care information solutions, or one of many other attractive niches, are receiving high interest from both private equity and strategic buyers," Tom O'Connor, Managing Director at Berkery Noyes, said. "Strategic buyers in particular are seeking to jumpstart anemic revenue growth by acquiring fast-growing, recurring revenue niche solution providers. They are also determined to accelerate their own growth by making acquisitions in order to provider fuller product suites, which they can up-sell and cross-sell to their client base."

Companies providing mobile healthcare technology, in particular, are drawing significantly more attention from acquirers, the report stated.

Venture capital funding for healthcare IT doubled from $1.2 billion to $2.2 billion in 2013, Mercom Capital Group reported earlier this month. The number of VC health IT deals more than tripled from 163 in 2012 to 571 in 2013 and the number of investors active in funding rounds for healthcare IT companies nearly doubled from 236 in 2012 to 466 last year.

Rock Health, a digital health startup seed fund, estimated that total digital health funding hit in 2013 at $1.92 billion, growth of 35 percent since 2012, and more than 100 percent growth since 2011.

To learn more:
- here's the announcement
- find the report

Suggested Articles

There is a potential legal skirmish brewing two of the largest telehealth companies over patent claims.

Buoyed by strong demand for its stock, GoodRx raised $1.1 billion in its IPO after pricing its deal well above its expected price range.

Microsoft's new healthcare cloud service will be generally available October 30 as the tech giant battles Google and Amazon in the cloud market.