NEW YORK — October 22, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2014 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 2014 and compares it with data covering 2013. This market includes information, technology, and digital companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

Total transaction value more than doubled during the past three months, from $3.2 billion to $7.0 billion. This was the peak for value throughout the seven quarters examined in the report. Also of note, the industry’s three highest value transactions year-to-date occurred in third quarter 2014.

The Healthcare IT segment experienced a 31 percent volume increase on a quarterly basis. It also accounted for 59 percent of the industry’s aggregate M&A volume, compared to 41 percent in the prior quarter. The largest Healthcare IT transaction in the third quarter and the overall industry’s highest value deal year-to-date was Cognizant Technology Solutions’ acquisition of TriZetto, which offers software and solutions to Healthcare payers and providers, for $2.7 billion. Cognizant made another transaction several weeks later in the fourth quarter with the acquisition of Cadient Group, a digital marketing agency that serves life sciences companies throughout the healthcare and pharma markets.

In addition to TriZetto, other notable Healthcare IT deals in third quarter 2014 included Cerner Corporations’ acquisition of Siemens Health Services, which is Siemens AG’s health information technology business, for $1.3 billion; and Conifer Health Solutions’ acquisition of SPi Healthcare, a provider of revenue cycle management solutions, for $235 million. As for other markets covered in the report, volume in the Pharma IT segment year-to-date saw an increase when compared to the corresponding time period in 2013, from 24 to 29 transactions.

“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,” said Jonathan Krieger, Managing Director at Berkery Noyes. “Buyers continue to look to capitalize on the size, growth attributes and underlying secular trends that will fuel acquisitions of software vendors that effectively address the reimbursement pressures, evolving reimbursement models, increased regulatory scrutiny, and structural changes brought on by reform.”

Krieger continued, “Hospital IT providers are also looking to engage ambulatory providers and care settings to coordinate care and reduce expenditures. Healthcare providers are increasingly adopting software solutions (i.e. EHRs, RCM, PM, Billing) to maximize efficiencies amidst a declining reimbursement rate environment, increased consumer financial responsibilities (High Deductible Health Plans), and a more complex claims coding process (ICD-10).”

“Buyers continue to see the positive macro trends that will benefit healthcare information and technology companies (HCIT),” stated Tom O’Connor, Managing Director at Berkery Noyes. “This includes the aging of America, the nearly 20% of GDP related to healthcare, the increased concern about medical errors, the need for unbiased physician education, the changing of the reimbursement models of government and private payers, the print to digital transition, increased regulatory and compliance requirements and ever-increasing specialization due to the huge amount of information available.”

O’Connor continued, “HCIT companies continue to develop unique software solutions to solve pain points along the health continuum. HCIT companies enjoy high growth rates, high cash flow margins, low capital expenditures and defensible positions in their marketplace. Strategic buyers are flush with cash and looking to jump start revenue growth or move into adjacent markets. Private equity has huge amounts of capital and leverage levels available and is looking to acquire or back unique opportunities with high growth rate and large market opportunity. With banks and hedge funds willing to lend at five to seven times cash flow in many instances, there’s no wonder that equity funds are pursuing available and unavailable assets with such vigor that double-digit multiples are not uncommon.”

“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. Meanwhile, patients are interested in access to medical information and want more control over their healthcare options.” Smith continued, “Given the favorable conditions in the marketplace, acquirers should continue to demonstrate strong demand in the areas of patient engagement, population health and related data analytics, treatment plan adherence, mobile solutions, and regulatory compliance.”