NEW YORK — July 25, 2018 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2018 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.

The report analyzes M&A activity during the first half of 2018 and compares it with the four previous six-month periods from 2016 to 2017. This market includes information, technology, digital, and services companies utilized by the pharmaceutical, healthcare payer, and healthcare provider spaces.

Total transaction volume declined three percent relative to second half 2017. Aggregate value rose 54 percent, from $13.63 billion to $20.93 billion. This was the peak for value throughout the last 30 months.

The median revenue multiple, after rising from 1.9x in first half 2017 to 3.0x in second half 2017, declined to 2.3x in first half 2018. Over the last two-and-a-half years, the median revenue multiple was 2.3x. Deals in the $10-$20 million range during this timeframe received a median enterprise value multiple of 1.5x revenue, compared to 2.4x revenue for those in the $20-$40 million range and 3.2x revenue for those in the $40 million and above range.

As for specific industry markets, volume in the Healthcare IT segment increased 23 percent on a half year basis, from 101 to 124 transactions. Seven of the overall industry’s top ten largest deals year-to-date occurred in the segment. Notable Healthcare IT transactions during the half year period included Roche’s announced acquisition of Flatiron Health, an oncology-specific healthcare technology and services company, for $1.9 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; and Vertitas Capital Partners’ announced acquisition of the Value-Based Care Division from GE Healthcare for $1.05 billion.

In addition, high profile Healthcare IT deals below the $1 billion threshold included R1 RCM’s acquisition of Intermedix Corporation, a provider of revenue cycle management, practice management, and data analytics services to individual healthcare providers, for $460 million; Philips Electronics’ announced acquisition of EPD Solutions, which specializes in image-guided procedures for cardiac arrhythmias, for $292 million; and Hyland Software’s acquisition of Allscripts’ OneContent business for $260 million.

The Healthcare Business Services segment experienced a 26 percent decline in volume, from 47 to 35 deals. This followed an 18 percent increase in second half 2017. The largest transaction in the Healthcare Business Services segment year-to-date was Veritas Capital-backed Verscend’s announced acquisition of Cotiviti, a provider of payment accuracy and analytics driven solutions, for $4.82 billion.

The combined Pharma IT, Business Services, and Information segments saw a 47 percent decrease in activity, from 51 to 27 transactions. This occurred after a nine percent gain in second half 2017. The largest deal in the Pharma related segments during first half 2018 was Amazon’s announced acquisition of PillPack, an online pharmacy, for $1 billion. Meanwhile, the segment with the largest half year increase in volume was Medical Education, which increased 77 percent, from 13 to 23 deals.

“We anticipate healthy transaction volume among buyers looking for tuck-in and bolt-on acquisitions that deepen their market penetration and strengthen their offerings,” said Tom O’Connor, Managing Director at Berkery Noyes. “ Moreover the credit environment is highly favorable for attractive deals. Particularly where a high percentage of revenue is recurring, credit providers are being aggressive in valuation and terms.”

According to Jonathan Krieger, Managing Director at Berkery Noyes, “Strategics continue to acquire businesses to build out their product portfolio and broaden their customer footprint. Healthcare constituents continue to seek niche software vendors that promote interoperability, structure clinical data, improve outcomes and reduce costs.”

“Attractive intellectual property (IP)-centric companies have been a primary focus for M&A activity,” stated Jeff Smith, Managing Director at Berkery Noyes. “This includes solutions for drug discovery and development, clinical trials, regulatory compliance, CRM, and new payment models.”

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