Big opportunities, still, for IT vendors

As industry struggles with massive change, technology must help smooth the way forward.
By Mike Miliard
10:52 AM
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The healthcare market, especially health IT, remains "highly fragmented," with lots of openings for entrepreneurs who can solve providers' "pain points," according to the latest trend report from Berkery Noyes.

The report analyzes merger and acquisition activity for the healthcare sector during the first three quarters of 2013 and compares it with data from 2012. This market includes information and technology companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

"The healthcare market remains highly fragmented, with lots of opportunities for entrepreneurs with unique ideas looking to start companies that solve important pain points along the healthcare continuum," said Tom O'Connor, managing director at Berkery Noyes, in a press statement. "Large strategic buyers are also looking to acquire unique content/software solutions that are solving challenges in the healthcare market and are growing rapidly, offering exit opportunities for entrepreneurs at very attractive prices."

He added that "healthcare deal flow continues to be strong for companies developing proprietary technology/content, of scale in their markets, high revenue (double digit) growth, high percentage of recurring revenue and large total addressable market opportunity."

The health IT industry underwent a 56 percent volume increase on a quarterly basis, according to the report. It also accounted for nearly half of the industry's aggregate M&A volume, as opposed to 31 percent in the prior quarter.

The largest healthcare IT transaction in third quarter 2013, as well as the overall industry's highest value deal in the quarter, was Vitera Healthcare Solutions' announced acquisition of Greenway Medical Technologies for $632 million. Other notable deals included Zotec Partners' acquisition of billing company Medical Management Professionals, for $202 million, and Medtronic's acquisition of CardioCom, which develops clinical telehealth technology, for $200 million.

Another big area of growth was the revenue cycle management subsector, which saw a 67 percent increase in volume on a quarter-to-quarter basis.

"There are a lot of healthcare IT companies experiencing operating momentum as healthcare providers, payers and life science competitors increasingly rely on them to structure and analyze data as well as engage patients," said Jonathan Krieger, managing director at Berkery Noyes, in a news release. "The M&A markets are currently an attractive exit option as the buyer universe has never been bigger and the debt markets are contributing to high valuation multiples."

"Attractive intellectual property-centric companies have been a primary focus for M&A activity," stated Jeff Smith, managing director at Berkery Noyes. "This includes solutions for drug discovery and development; clinical trials; regulatory compliance; CRM; population health; provider clinical, financial and operational data analytics; and new payment models."

Access the full report here.

[See also: Record quarter sees VC cash top $737M]