2019-01-16 Berkery Noyes Releases Healthcare/Pharma Information and Technology Industry M&A Report For Full Year 2018

NEW YORK — January 16, 2019 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2017 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.

The report analyzes merger and acquisition activity for the industry during 2018 and compares it with data covering 2016 and 2017. This market includes information, technology, digital, and services companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

Total transaction volume remained nearly constant on a year-to-year basis. Aggregate value increased 18 percent, from $29.68 billion to $35.07 billion. In terms of valuations, the median revenue multiple improved from 2.2x to 2.4x, while the median EBITDA multiple declined from 13.7x to 12.6x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 1.6x revenue, compared to 3.1x revenue for those in the $20 million and above range. Of note, those in the $80-$160 million range had a median revenue multiple of 3.9x.

Deal volume in the Healthcare IT segment increased 19 percent on an annual basis. High profile Healthcare IT transactions during the year included:

• Veritas Capital and Evergreen Coast Capital’s announced acquisition of athenahealth, a provider of network-enabled services for hospital and ambulatory customers, for $5.6 billion;
• Inovalon’s announced acquisition of ABILITY Network, a developer of Software-as-a-Service (SaaS) tools designed to simplify administrative and clinical complexities in the healthcare sector, for $1.2 billion;
• Veritas Capital Partners’ announced acquisition of the Value-Based Care Division from GE Healthcare for $1.05 billion;
• ResMed’s announced acquisition of MatrixCare, a post-acute care software company, for $750 million; and
• Global Payments’ acquisition of AdvancedMD, a healthcare technology company that offers cloud medical office software to ambulatory medical practices, for $700 million.

The Pharma IT segment experienced a 48 percent decline in volume, from 60 to 31 transactions. This followed a 25 percent rise in 2017. Notable Pharma related deals during the year included Amazon’s announced acquisition of PillPack, an online pharmacy, for $753 million; ResMed’s announced acquisition of Propeller Health, a digital therapeutics company that supports respiratory health management, for $225 million; and Medidata’s announced acquisition of SHYFT Analytics, a cloud-based data analytics platform used by the pharma and biotech sectors, for $195 million.

As for other select markets covered in the report, the segment with the largest rise in volume was Medical Education with an 68 percent gain, from 22 to 37 transactions. The Consumer Health segment increased 15 percent in M&A activity, from 33 to 38 acquisitions. Meanwhile, the Healthcare Business Services segment underwent a nine percent decline in volume, from 87 to 79 deals. The segment’s largest transaction in 2018 was Veritas Capital-backed Verscend’s acquisition of Cotiviti, a provider of payment accuracy and analytics driven solutions, for $4.82 billion.

“Private venders of tech-enabled healthcare solutions continue to be in high demand by both strategic and financial buyers,” said Jonathan Krieger, Managing Director at Berkery Noyes. “There is a supply and demand imbalance where buyers looking to broaden their exposure to the 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.”

According to Tom O’Connor, Managing Director at Berkery Noyes, “Strategic buyers in particular are seeking to jumpstart anemic revenue growth by acquiring fast growing, recurring revenue niche solution providers. They are also determined to accelerate their own growth by making acquisitions in order to provider fuller product suites, which they can up-sell and cross-sell to their client base.”

“Given the favorable conditions in the marketplace, acquirers should continue to demonstrate strong demand in many areas including patient engagement, population health and related data analytics, treatment plan adherence, mobile solutions, and regulatory compliance,” stated Jeffrey Smith, Managing Director at Berkery Noyes.

A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR FULL YEAR 2018 is available at the Berkery Noyes website.