Health IT mergers on upward climb
'Both strategic and financial buyers are on the hunt for attractive acquisitions of scale.'
Mergers and acquisitions for the health IT market continue to see big numbers, with total deal volumes increasing 18 percent since the second half of 2013, according to a new Berkery Noyes trend report.
The report, which analyzed M&A activity during the first half of 2014 and compared it with previous years, found aggregate value increased nearly 50 percent, from $3.7 billion up to $5.5 billion.
The overall deal volume for the healthcare IT segment also saw an increase of 17 percent, going from 65 to 76 transactions, marking the segment's biggest increase on a half year basis since 2012, officials noted. The big deals for 2014 thus far included Summit Partners' acquisition of Ability Network for $550 million; ISG Holdings being acquired by Xerox for $225 million, and Emdeon's $115 million acquisition of healthcare revenue cycle management company Capario.
[See also: Big growth forecast for health IT market.]
"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 July 21 press statement announcing the report. "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."
O'Connor called the market a "seller's market."
[See also: Health IT attracting huge investments.]
"Private vendors of tech-enabled healthcare solutions continue to be in high demand by both strategic and financial buyers," added Jonathan Krieger, managing director at Berkery Noyes, in a statement. "There is a supply and demand imbalance where buyers looking to broaden their exposure to the $3 trillion healthcare space with very favorable underlying growth drivers continue to exceed the number of sellers, and as a result multiples being paid are very attractive to sellers."
Other market segments included in the report also showed considerable growth. Pharma IT, for instance, increased from 15 to 24 transactions, with the largest deal being Dassault Systemes' $652 million acquisition of Accelrys Software, scientific lifecycle management software company. The consumer healthcare segment also fared well, seeing increases of 16 to 21 transactions.