M&A strong in 'hyper competitive' market
A dynamic health IT marketplace is rewarding robust and scalable companies – especially those whose products focus on revenue cycle and clinical decision making, according to a trend report from investment bank Berkery Noyes.
The report tracks merger and acquisition activity for the healthcare and pharmaceutical IT industries for 2013, comparing it with the previous two years. While total transaction volume decreased 16 percent on a yearly basis, the report found, when compared to 2011, volume saw a 3 percent uptick.
Aggregate deal value rose 2 percent throughout the last dozen months, from $11.63 billion in 2012 to $11.81 billion in 2013, according to Berkery Noyes.
[See also: M&A can be hazardous to health IT.]
Health IT as a percentage of total deal volume stayed roughly the same, at almost 40 percent, according to the report. Constellation Software was the segment's most active acquirer with five transactions in 2013. The largest healthcare IT transaction was Experian's $850 million November acquisition of revenue cycle company Passport Health Communications.
Despite the overall industry's downward movement in volume during 2013, the outlook for M&A remains positive, analysts said.
"Many healthcare IT companies are experiencing operating momentum as the industry adopts technologies at unprecedented rates," said Jonathan Krieger, managing director at Berkery Noyes, in a press statement.
As ICD-10 and Stage 2 meaningful use bear down on the industry – to say nothing of pay-for-performance and accountable care – "software is becoming increasingly necessary to achieve operating efficiencies when dealing with a $3 trillion complex, rapidly evolving landscape," he added.
[See also: Revenue cycle ripe for radical change.]
"Private, middle-market, tech-enabled companies are at the forefront of developing these emerging, niche technologies and are in high demand by strategic and financial acquirers," said Krieger.
Mobile technology is also starting to make its presence felt in a big way, of course.
"The technological advancements in mobile healthcare are fostering conditions favorable to increased patient engagement and adherence," said Jeffrey Smith, managing director at Berkery Noyes, in a statement. "For instance, new diagnostic tools that allow for easier interaction with physicians can help with wellness and preventive health. Medical professionals who use mobile technology to collect data from their patients and improve point of care documentation efforts are also benefitting."
"In today's hyper competitive HIT marketplace, companies with good scale, recurring revenue and high growth rates, whether they are revenue cycle management, point-of-care information solutions, or one of many other attractive niches, are receiving high interest from both private equity and strategic buyers," said Tom O'Connor, managing director at Berkery Noyes.