5 biggest HIT VC deals and mergers of 2012

By Mike Miliard
08:02 AM

Health IT venture capital funding approached $1.2 billion, disbursed across more than 160 deals, in 2012. That dwarfs the $480 million given in 49 deals in 2011, and the 22 deals worth $211 million in 2010, according to a new report from Mercom Capital Group.

Indeed, the fourth quarter of 2012 saw the largest number of deals in a single quarter since the communications and consulting firm started tracking the health IT sector in 2010, say Mercom officials.

"While the focus of funding has been in the health information management (HIM) category, which covers technologies on the healthcare practice side, there is significant investment and funding going into companies that engage the consumers – like mobile health, telehealth, personal health and social health," said Raj Prabhu, managing partner of Mercom Capital Group, in a statement.

The top five VC funding deals in 2012:

  1. Castlight Health, which develops technology to enable comparisons of doctors, hospitals and medical procedures based on price and quality, raised $100 million.
  2. 23andMe, a personal genetics company, raised $58 million.
  3. GoHealth, an online portal that helps compare health insurance coverage, raised $50 million.
  4. Kinnser Software, which provides clinical support to home health companies, raised $40 million
  5. Practice Fusion, which develops a free Web-based electronic medical record, raised $34 million.

The top investors that participated in VC funding rounds in 2012 were: Connecticut Innovations, Founders Fund, Merck Global Health Innovation Fund, Qualcomm and West Health Investment Fund, all with four deals each, according to Mercom. Other notable investors included Aberdare Ventures, Canaan Partners, First Round Capital and Khosla Ventures, with three deals apiece.

[See also: VC opportunities for an 'explosion of bright young companies']

Meanwhile, health IT merger and acquisition activity stayed strong compared to recent years, with some $7 billion worth of activity. McKesson was the most active acquirer with four transactions, according to Mercom. There were 14 other companies with two acquisitions each. Thirteen private equity firms also made acquisitions in 2012.

Most of the M&A activity was centered on HIM companies. In that space, 16 practice management companies were involved in M&A, as well as 15 clinical decision support companies and 16 EMR/EHR companies among others.

The top five mergers included:

  1. The $1.4 billion acquisition of Sunquest Information Systems, a provider of diagnostic information technology and clinical and anatomic laboratory software solutions by Roper Industries;
  2. The $1.25 billion acquisition of Thomson Reuters’ healthcare data and analytical solutions by Veritas Capital;
  3. The $1.1 billion acquisition of M*Modal, a medical transcription services company, by One Equity Partners;
  4. The $635 million acquisition of consulting firm Decision Resources Group by Piramal Healthcare; and
  5. The $473 million acquisition of HIT consultants maxIT Healthcare by Science Applications International Corporation.

"The HIT sector really took off in 2012," said Prabhu.


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