Health IT has hot half for M&A

'The breadth of acquirers for HIT companies continues to expand.'
By Mike Miliard
10:44 AM
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During the first six months of 2013, health information technology was the "most active market segment" of the healthcare/pharma/IT industry for mergers and acquisitions, according to investment bank Berkery Noyes.

Industry-wide, deal volume decreased 16 percent since second half 2012, but the number of deals was close to the industry's historical average for 2011 when examined on a half year basis, according to the report.

Transaction value, however, increased 58 percent, from $5.08 billion in second half 2012 to $8.03 billion in first half 2013. This had a lot to do with BC Partners' announced acquisition of Springer Science & Business Media, a scientific, technical and medical publisher, for $4.42 billion.

Roper Industries was responsible for the second most valuable transaction in first half 2013, according to Berkery Noyes, with its acquisition of Managed Healthcare Associates, which develops software and data analytics for pharmacies and care providers, for $1 billion.

Healthcare IT remained the most active market segment in first half 2013, representing 40 percent of the industry's aggregate volume year-to-date, the report showed, noting that those companies that are acquired are increasingly those that facilitate healthcare information sharing and interoperability – for example, Allscripts' $188 million acquisition of dbMotion.

"The breadth of acquirers for HIT companies continues to expand as buyers look to capitalize on the size, rapidly evolving dynamics and growth characteristics of the healthcare market," said Jonathan Krieger, managing director at Berkery Noyes, in a statement. "Acquirers are aggressively looking to broaden product suites, leverage distribution channels, and realize revenue and cost synergies."

The report said other acquisitions of note included athenahealth's $214 million Epocrates deal, which Berkery Noyes called he highest value mobile-based healthcare acquisition in the past two-and-a half years.

The largest pharma IT transaction backed by a financial sponsor in first half 2013 was JLL Partners' acquisition of BioClinica, which develops clinical trial management technology, for $105 million.

"Large vendors are taking steps to stay ahead of the technology curve," stated Jeffrey Smith, managing director at Berkery Noyes, in a statement. "Some of the most popular tools being sought by acquirers include software focused on analytics, as well as mobile based platforms. There is potential in the market for consolidation as acquirers look for solutions to help update their information delivery methods."

"Many transaction closings were pushed forward into 2012 because of the changes in U.S. capital gains tax rates," noted Tom O'Connor, managing director at Berkery Noyes.

"As a result, there were relatively few unique HIT assets of scale on the market in the first half of 2013, which is fostering pent-up demand," he said. "The M&A environment should stay attractive for HIT sellers who are considering a liquidity event in 2013 or 2014, and high quality assets of scale will continue to command healthy valuations in the near-term."

Read more of the report here.

[See also: VC funding sets yet another record]