NEW YORK — October 16, 2013 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2013 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 2013 and compares it with data covering 2012. This market includes information and technology companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.
Berkery Noyes’ research showed that volume increased seven percent from second to third quarter 2013. Total transaction value fell 68 percent over the past three months, from $6.3 billion to $2.0 billion. However, value in second quarter 2013 was skewed by the acquisition of Springer Science & Business Media for $4.4 billion. Overall value year-to-date declined 13 percent when compared to the first three quarters of 2012.
“Healthcare deal flow continues to be strong for companies developing proprietary technology/content, of scale in their markets, high revenue growth (double digit), high percentage of recurring revenue and large total addressable market opportunity. At the same time, demand for advertising support or sponsored journals and CME events is very soft,” said Tom O’Connor, Managing Director at Berkery Noyes. “The healthcare market remains highly fragmented, with lots of opportunities for entrepreneurs with unique ideas looking to start companies that solve important pain points along the healthcare continuum. O’Connor continued, “Large strategic buyers are also looking to acquire unique content/software solutions that are solving challenges in the healthcare market and are growing rapidly, offering exit opportunities for entrepreneurs at very attractive prices.”
The Healthcare IT segment underwent a 56 percent volume increase on a quarterly basis. It also accounted for nearly half of the industry’s aggregate M&A volume, as opposed to 31 percent in the prior quarter. The largest Healthcare IT transaction in third quarter 2013, as well as the overall industry’s highest value deal in the quarter, was Vitera Healthcare Solutions’ announced acquisition of Greenway Medical Technologies for $632 million in enterprise value. Other notable deals in the segment included Zotec Partners’ acquisition of Medical Management Professionals, a medical billing and business management services company, for $202 million; and Medtronic’s acquisition of CardioCom, a provider of clinical telehealth services, for $200 million. In addition, another area of growth was the revenue cycle management subsector, which saw a 67 percent increase in volume on a quarter-to-quarter basis.
“There are a lot of Healthcare IT companies experiencing operating momentum as healthcare providers, payors and life science competitors increasingly rely on them to structure and analyze data as well as engage patients,” stated Jonathan Krieger, Managing Director at Berkery Noyes. “The M&A markets are currently an attractive exit option as the buyer universe has never been bigger and the debt markets are contributing to high valuation multiples.”
Deal volume in the Pharma IT segment increased 33 percent year-to-date when compared to the corresponding period in 2012. “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; population health; provider clinical, financial and operational data analytics; and new payment models.”
Smith continued, “Moreover, the convergence of advanced knowledge management technologies with new data analytics is enabling pharmaceutical suppliers to reduce both the risk and time to market of developing new drugs while improving their safety and effectiveness. Given all of these factors, the M&A environment for information and technology companies serving the pharmaceutical market should remain robust over the next 12 to 24 months.”
A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR THIRD QUARTER 2013 is available at the Berkery Noyes website.