Healthcare IT funding, M&A activity surges

By Molly Merrill
09:16 AM

Venture capital funding and merger and acquisition activity in the healthcare IT sector saw significant growth in the third quarter of 2011, according to a report from global communications and consulting firm Mercom Capital Group.

The report shows that VC funding for healthcare IT in Q3 more than tripled, with $207 million in 17 deals compared to $66 million in six deals in the previous quarter. VC funding for the same quarter last year came to $62 million in seven deals. Fifty different investors participated in these funding rounds.
“It was the best quarter in terms of both VC funding and M&A activity in the healthcare IT sector since the first quarter of 2010," said Raj Prabhu, managing partner at Mercom Capital Group. "It is encouraging to see that a lot of these funding rounds were early stage deals."
Top VC funding rounds included:

  • $75 million by ZocDoc
  • $27 million by Awarepoint
  • $20.1 million by CareCloud
  • $20 million by One Medical Group and
  • $20 million by SeeChange Health

The report also indicates that M&A activity in the healthcare IT sector surged this quarter amounting to $4.7 billion in 37 transactions compared to $703 million in Q2 2011.
Major M&A transactions included the following acquisitions:

  • Emdeon by Blackstone Capital Partners for $3 billion
  • Vantage by General Dynamics for $960 million
  • Sage Healthcare by Vista Equity Partners for $320 million
  • PayFlex by Aetna for $202 million and
  • M*Modal by MedQuist Holdings for $130 million

By way of technology, health information management companies were involved in most funding and M&A transactions this quarter, according to the report.

Click here to see all funding transactions for Q3.