NEW YORK — October 9, 2012 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2012 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.
The report analyzes merger and acquisition activity for the industry during the first three quarters of 2012 and compares it with data covering 2011. This market includes information and technology companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.
M&A activity year-to-date improved 19 percent compared to the first three quarters of 2011. However, both transaction volume and value fell seven percent specifically from second to third quarter 2012. The median revenue multiple from 2011 through the first three quarters of 2012 increased from 1.8x to 2.1x, and the median EBITDA multiple rose from 9.9x to 10.5x.
Examining market activity per industry segment, Healthcare Business Services rose 20 percent in the last three months. The number of transactions in the Medical Information segment more than doubled within the same timeframe. Meanwhile, the largest Pharma IT transaction in the quarter and thus far in 2012 was Thoma Bravo’s announced acquisition of Mediware Information Systems for $147 million. In the Healthcare IT segment, private equity was responsible for 23 percent of transaction volume but 54 percent of value through third quarter 2012.
“Legislative incentives continue to increase the velocity of deal flow in the healthcare IT M&A market,” stated Jonathan Krieger, Managing Director at Berkery Noyes. “Focuses on the interoperability and connectivity of clinical and financial information are heavily dependent on enabling technologies. The healthcare payor side of the business is seeing a lot of deal activity as health insurers continue to diversify revenue streams and acquire third-party vendors," said Krieger. "Recent deal activity in the healthcare audit recovery niche highlights this trend.”
In addition, there were several notable deals pertaining to electronic medical transcription services and medical speech recognition, a component of the industry that has already come close to matching its transaction volume for all of 2011. This included One Equity Partners’ acquisition of M*Modal for $1.1 billion in enterprise value and iMedX’s announced acquisition of Electronic Medical Transcription Services in third quarter 2012. On a related note, Nuance acquired Transcend Services in first quarter 2012 for $318 million, the company’s largest healthcare related transaction since its acquisition of eScription in 2008. Nuance also continued its healthcare industry focus in third quarter 2012 by announcing a Healthcare IT transaction, acquiring QuadraMed’s Health Information Management (HIM) Business.
The largest deal in the Healthcare IT segment in third quarter 2012 involved the healthcare provider laboratory market. “As highlighted by Roper Industries’ acquisition of Sunquest Information Systems for $1.4 billion, there is much interest in software solutions for the hospital and clinical laboratory markets. The opportunity to integrate data and workflow is a key strategic driver in the provider environment, and supports higher quality care, patient safety, and lower costs,” said Jeffrey Smith, Managing Director at Berkery Noyes.
Financially sponsored transactions accounted for 65 percent of industry wide transaction value in the first three quarters of 2012, compared to 49 percent in the same time period for 2011. “Both strategic and financial buyers are looking to acquire companies that are experiencing rapid growth,” said Tom O’Connor, Managing Director at Berkery Noyes. “Companies offering unique software tools and solutions and have scale, rapid revenue growth and recurring revenue models are receiving a premium acquisition price.”
A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR THIRD QUARTER 2012 is available at the Berkery Noyes website.