NEW YORK — January 21, 2015 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2014 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.

The report analyzes merger and acquisition activity for the industry during 2014 and compares it with data covering 2012 and 2013. This market includes information, technology, and digital companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

Total transaction volume increased 17 percent on a yearly basis. Aggregate deal value rose 26 percent, from $11.88 billion in 2013 to $15.02 billion in 2014. In terms of valuations, the industry’s median enterprise value multiples remained nearly constant at 2.6x revenue and 11.5x EBITDA, respectively.

As for financial sponsors, the number of deals increased 26 percent, from 84 to 106 transactions. Vista Equity Partners was responsible for the industry’s largest private equity deal in 2014 with the acquisition of Advanced Computer Software Group for $1.11 billion. Advanced Computer Software Group offers patient management software to healthcare providers, back-office systems for businesses, and outsourced information technology services.

Deal volume in the Healthcare IT segment improved 33 percent on a year-to-year basis. The Healthcare IT segment accounted for almost half of the industry’s aggregate deal volume, and strategic acquirers comprised 70 percent of the segment’s volume. The industry’s largest overall transaction during the year was Cognizant Technology Solutions’ acquisition of Healthcare IT software and solutions provider TriZetto for $2.7 billion.

Additional deals in the segment by notable acquirers included Summit Partners’ acquisition of Ability Network, a web-based technology provider that links healthcare providers to Medicare, for $550 million; MedImmune’s acquisition of Definiens, a provider of image analysis and data analysis technology, for $150 million (note that MedImmune is the global biologics research and development arm of biopharmaceutical company AstraZeneca); Emdeon’s acquisition of Change Healthcare, which offers tools for employers and healthcare plans to reduce healthcare spending, for $135 million; and Premier’s acquisition of TheraDoc, a provider of electronic clinical surveillance software, for $117 million.

Regarding other markets covered in the report, the segment with the largest year-to-year rise in volume was Consumer Health. The number of Consumer Health deals increased 43 percent, from 23 to 33 transactions. In addition, volume in the Pharma IT segment saw a slight uptick and rose for the third consecutive year, with a total of 37 deals in 2014.

“Strategic buyers are looking to increase their exposure to the healthcare sector and have significant cash positions they’re looking to be put to work,” said Jonathan Krieger, Managing Director at Berkery Noyes. “The debt markets, which have fueled M&A activity and valuation multiples in the recent past, are still strong and liquid. Financial buyers have $1.2 trillion of dry powder to put to work and are taking advantage of the liquidity in the debt markets to compete with strategics on valuation.” Krieger continued, “Life science companies are also increasingly outsourcing non-core competencies such as data analytics, clinical trial functions and CRM to software vendors to maximize operating efficiencies and comply with regulatory mandates.”

“The current M&A market is as robust as we have seen it since 2008,” noted Tom O’Connor, Managing Director at Berkery Noyes. "It’s very seller friendly with large strategic buyers in particular looking for software/content solutions that have unique IP, scale, rapid growth and recurring revenue that are solving challenges and pain points in the healthcare market. Many buyers are willing to pay attractive prices for these assets.”

“Greater attention is being placed on encouraging patient adherence to treatment plans through the use of mobile applications,” stated Jeffrey Smith, Managing Director at Berkery Noyes. “Mobile healthcare may also assist in improving the results of patient reported outcomes (PROs) and promoting health and wellness. At the same time, pharmaceutical companies are looking for the ability to better analyze and leverage their data, with the aim of incentivizing patient adherence and increasing revenue.” Smith continued, “As the marketplace becomes more competitive, a key challenge for software and technology companies serving the pharmaceutical industry will be to develop and effectively monetize their mobile solutions to stay ahead of the curve.”

A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR FULL YEAR 2014 is available at the Berkery Noyes website.