NEW YORK — July 14, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2016 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.

The report analyzes M&A activity during the first half of 2016 and compares it with the four previous six-month periods from 2014 to 2015. This market includes information, technology, and digital companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

Total deal volume increased three percent relative to second half 2015. Aggregate value rose 72 percent, from $10.44 billion to $17.96 billion. The rise in overall value was attributable in significant part to IMS Health’s announced merger with Quintiles Transnational Holdings for $8.75 billion. This merger of equals will lead to the creation of a new company called Quintiles IMS, a clinical trials and data specialist, with a market value of about $18 billion. If this deal is excluded, overall transaction value declined 12 percent during the past three months but still gained 59 percent on a year-over-year basis.

IMS Health was also the industry’s most active acquirer in first half 2016 with four transactions. In addition to the IMS-Quintiles Transnational merger, this consisted of Privacy Analytics, a data governance software company that helps protect patient privacy; Dimensions Healthcare, a developer of healthcare informatics solutions used by payers, providers, and regulators; and AlphaImpactRx, which offers research and analytics based insight for biopharmaceutical and consumer health companies.

Transaction volume in the Healthcare IT segment declined five percent on a half year basis. Strategic acquirers have been dominant in the sector, accounting for 85 percent of Healthcare IT deal activity over the last 30 months examined in the report, as opposed to 76 percent of volume for the aggregate industry.

Regarding value, six of the industry’s top ten highest value deals year-to-date were in the Healthcare IT segment, making it the best represented sector in the top ten list. The segment’s two largest transactions in first half 2016 were both backed by financial sponsors. Along these lines were GI Partners’ announced acquisition of Netsmart Technologies, a provider of electronic health records, patient management, billing and other solutions for the health and human services sector, which is being acquired in a joint venture with Allscripts, for $950 million; and Veritas Capital Partners’ announced acquisition of Verisk Health, a data services and analytics company, for $820 million.

Other notable Healthcare IT deals in first half 2016 included ResMed’s announced acquisition of Brightree, a cloud-based software company that serves the post-acute care sector, for $800 million; and Wipro’s announced acquisition of HealthPlan Services, a technology and Business Process as a Service (BPaaS) provider that serves the U.S. health insurance sector, for $460 million.

As for additional industry markets, the segment with the largest half year increase in volume was Pharma IT, which more than tripled from 9 to 31 transactions. This was the highest point for Pharma IT volume during the five half year periods covered in the report. M&A volume in the combined Pharma Information and Pharma Business segments improved on a year-over-year basis, from 10 to 14 deals. Meanwhile, the Medical Information segment also saw an uptick during this timeframe, from 9 to 12 deals. The largest Medical Information deal in first half 2016 was IBM Watson Health’s announced acquisition of Truven Health Analytics, a provider of healthcare data, analytics and insights, for $3.57 billion.

“A broad range of information, data and technology solutions are leading to end-to-end offerings in the healthcare marketplace,” said Jonathan Krieger, Managing Director at Berkery Noyes. “There is a high rate of new business formation occurring, with many of these companies supported by steadily growing venture capital and private equity investment. This includes a host of newer entrepreneurial companies driven by innovation and opportunity.”

“We’re continuing to see strong interest from both strategic and private equity buyers looking to acquire private HIT companies to penetrate the healthcare market,” said Tom O’Connor, Managing Director at Berkery Noyes. “However, as can be seen by the attached report, strategic buyers continue to dominate deal flow. Strategic buyer’s ability to leverage existing customer bases, industry knowledge and relationships often enable them to accelerate the growth trajectory of the companies they acquire thereby letting them pay a very competitive price.”

O’Connor continued, “Many healthcare technology companies are enjoying rapid revenue growth, high cash flow margins, low capital expenditures and defensible positions in the marketplace. These characteristics make them attractive acquisition targets. The challenge in the marketplace today is to find a HIT company with little or no institutional capital that is growing rapidly with recurring revenue that is willing to entertain a sale.”

According to Jeffrey Smith, Managing Director at Berkery Noyes, “The convergence of advanced knowledge management technologies with new data analytics and visualization applications, drug/compound databases, and scientific content is enabling pharma suppliers to reduce both risk and time-to-market, while improving the safety and effectiveness of new drugs. As a result the active pace of M&A activity in the pharma sector is expected to continue.”

A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR HALF YEAR 2016 is available at the Berkery Noyes website.