NEW YORK — July 17, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2014 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.
The report analyzes M&A activity during the first half of 2014 and compares it with the four previous six-month periods from 2012 to 2013. This market includes information and technology companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.
Total deal volume increased 18 percent since second half 2013. Aggregate value gained 46 percent, from $3.73 billion to $5.45 billion. The median revenue multiple decreased from 2.5x to 2.0x over the past six months, while the median EBITDA multiple declined from 9.7x to 8.5x.
Deal volume in the Healthcare IT segment improved 17 percent, from 65 to 76 transactions. This was the segment’s largest increase on a half year basis throughout the past two-and-a-half years. Notable Healthcare IT deals during first half 2014 included Summit Partners’ acquisition of Ability Network for $550 million, Xerox’s acquisition of ISG Holdings for $225 million, and Emdeon’s acquisition of Capario for $115 million.
“In the rapidly changing healthcare information/technology marketplace, both strategic and financial buyers are on the hunt for attractive acquisitions of scale,” stated Tom O’Connor, Managing Director at Berkery Noyes. “Companies with good scale, recurring revenue, and high growth rates with a large addressable market opportunity, whether they are long term care information/education/technology providers, revenue cycle management, point-of-care information solutions, or one of many other attractive niches, are in high demand from both private equity and strategic buyers.”
O’Connor continued, “Financial buyers also have over $500 billion of dry powered which they can leverage 4x-8x times. It is a seller’s market as with all the attractive dynamics noted above there remains a lack of quality assets of scale available so any attractive assets commands high valuation and multiple buyers.”
“Private venders of tech-enabled healthcare solutions continue to be in high demand by both strategic and financial buyers,” said Jonathan Krieger, Managing Director at Berkery Noyes. “There is a supply and demand imbalance where buyers looking to broaden their exposure to the $3 trillion healthcare space with very favorable underlying growth drivers continue to exceed the number of sellers, and as a result multiples being paid are very attractive to sellers.”
As for other markets covered in the report, volume in the Pharma IT continued to show strength, rising from 15 to 24 transactions. The largest deal in both the segment and overall industry was Dassault Systemes’ acquisition of Accelrys Software, a provider of scientific lifecycle management software for chemistry, biology, and materials research, for $652 million. Meanwhile, the Consumer Healthcare segment increased from 16 to 21 transactions and the Healthcare Business Services segment improved from 44 to 49 transactions.
According to Jeffrey Smith, Managing Director at Berkery Noyes, “A broad range of information, data, technology, knowledge management solutions, and services are leading to end-to-end offerings for the pharmaceutical, biotechnology, and life sciences industries. Evidence-based marketing is a key trend in this segment, with its emphasis on data, science, pharmacoeconomics, and comparative effectiveness.” Smith continued, “We expect to see continued robust new business formation in the life sciences commercialization space, with an emphasis on proprietary intellectual property assets, new software analytics, regulated content solutions, patient engagement, mobile, and global platforms.”
A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR HALF YEAR 2014 is available at the Berkery Noyes website.