NEW YORK — October 11, 2018 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2018 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.
The report analyzes M&A activity for the sector during the first three quarters of 2018 and compares it with data covering 2017. This market includes information, technology, and digital companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.
Transaction volume year-to-date increased six percent compared to the corresponding timeframe in 2017. Aggregate deal value stayed about the same at $25.4 billion. In terms of year-over-year valuations, the median revenue and EBITDA multiples remained nearly constant at 2.2x and 11.7x, respectively.
Deal flow in the Healthcare IT segment declined 11 percent over the past three months. Relative to the same time period in 2017, the segment year-to-date experienced a 25 percent gain in volume. Notable Healthcare IT transactions in third quarter 2018 included Global Payments’ acquisition of AdvancedMD, a healthcare technology company that offers cloud medical office software to ambulatory medical practices, for $700 million; TRIMEDX’s announced acquisition of Aramark’s healthcare technologies business for $300 million; and Mediware’s acquisition of BlueStrata EHR, a cloud-based electronic health record (EHR) for the long-term post-acute care market. In addition, AdvancedMD completed a deal of its own during the quarter with the acquisition of NueMD, a SaaS platform that offers practice management, clinical and medical billing applications, and medical billing outsourcing services.
As for other select markets covered in the report, M&A activity in the combined Pharma IT segment increased 43 percent on a quarterly basis, from 14 to 20 transactions. Deal volume in the Healthcare Business Services segment improved 69 percent over the past quarter, from 16 to 27 transactions, making it the sector with the largest increase. The highest value Healthcare Business Services deal in third quarter 2018 was CareTech Community Services’ announced acquisition of Cambian Group, a provider of specialist behavioral health services, for $378 million.
Regarding the Consumer segment, the number of transactions remained about the same. Notable third quarter Consumer deals included Ipsos’ announced acquisition of four global divisions of GfK Research – health, customer experience, experience innovation, and public affairs – for $123 million; and WebMD’s acquisition of Vitals Consumer Division, which offers online tools that help consumers find the right healthcare providers and connect with other patients.
Meanwhile, notable marketing related deals in third quarter 2018 included UDG Healthcare’s acquisition of Create NYC, a healthcare creative communications agency, for $58 million; Ruder Finn’s acquisition of RLA Collective, an integrated marketing agency specializing in health and wellness, including over-the-counter, nutritional supplement, and medical device brands in North America; Fishawack Group’s acquisition of HealthCircle Advertising, a strategic brand communications agency with experience in direct-to-patient communications, digital solutions, and medical communications; and Publicis Health’s acquisition of Payer Sciences, a health marketing agency that helps biopharmaceutical manufacturers navigate the U.S. reimbursement environment.
According to Tom O’Connor, Managing Director at Berkery Noyes, “Strategic buyers are dominating the deal flow. However, financial buyers remain on the hunt and have over $500 billion of dry powder which they can leverage. We haven’t seen such a seller’s market since the 2004-2007 timeframe.” O’Connor continued, “There remains a lack of quality assets of scale available, so any attractive assets are commanding high valuations and multiple bidders.”
“Enabling technologies are becoming necessary to address and succeed in a marketplace experiencing declining reimbursement rates, increased regulatory and compliance requirements, pay-for-performance and coordinated care mandates,” stated Jonathan Krieger, Managing Director at Berkery Noyes.
“For both healthcare payers and providers, technology can improve administrative efficiency and accuracy,” added Jeffrey Smith, Managing Director at Berkery Noyes. “This pertains to billing, scheduling, claims processing, and other workflow issues. Incentivizing better healthcare outcomes and other cost saving measures through Accountable Care Organizations (ACOs) is another opportunity to do so. Patients are interested in access to medical information and want more control over their healthcare options.”
A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR THIRD QUARTER 2018 is available at the Berkery Noyes website.