NEW YORK — July 20, 2017 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2017 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.
The report analyzes M&A activity during the first half of 2017 and compares it with the four previous six-month periods from 2015 to 2016. This market includes information, technology, services, and digital companies utilized by the pharmaceutical, healthcare payer, and healthcare provider spaces.
Total transaction volume decreased four percent relative to second half 2016. Strategic M&A activity declined six percent on a half year basis. Private equity deal flow, following an 18 percent increase in second half 2016, stayed nearly the same in first half 2017.
Aggregate transaction value rose 31 percent, from $12.66 billion to $16.53 billion. Of note, two of the top three and three of the top five largest deals year-to-date occurred in the Pharma IT and Services related segments. This consisted of Pamplona Capital Management’s announced acquisition of PAREXEL International Corporation, a global biopharmaceutical services provider, for $4.92 billion; INC Research’s announced merger with inVentiv Health for $4.55 billion, which will lead to the creation of the world’s second largest biopharmaceutical outsourcing provider; and McKesson Corporation’s acquisition of CoverMyMeds, which offers electronic prior authorization solutions to pharmacies, providers, payers and pharmaceutical manufacturers, for $1.1 billion.
Rounding out the industry’s top five list of highest value deals in first half 2017 were Blackstone and Canada Pension Plan Investment Board’s (CPPIB) announced acquisition of Ascend Learning, which offers educational content and online tools for students, educational institutions and employers, with a particular focus on healthcare and other licensure-driven occupations, for $2 billion in the Medical Education segment; and TelaDoc’s announced acquisition of Best Doctors, a virtual medical consultation company, for $440 million in the Consumer Health segment.
“Among several areas, the telehealth market is growing significantly as integrated services gain in popularity,” said Tom O’Connor, Managing Director at Berkery Noyes. “Virtual doctor visits are becoming more widespread with email, video conferencing, phone, and other forms of communication offering an alternative option for non-emergencies.” O’Connor continued, “Healthcare institutions are investing in various areas of information technology such as electronic health portals, consumer focused applications, remote monitoring of test results, and digital image transmission. When examined in totality, telehealth offers substantial promise and technology companies in this space should continue to garner strong interest from both strategic and financial acquirers.”
In addition to the Best Doctors acquisition, deals in the telehealth sector in first half 2017 included GlobalMed’s acquisition of TreatMD, an international telemedicine company that connects patients and physicians through on-demand scheduling and other solutions; InTouch Technologies’ acquisition of C30 Medical Corporation, a physician-led telemedicine management and physician coverage provider that serves more than 30 hospitals across the United States; and Traffk’s acquisition of Capsci Health, a HIPPA compliant mobile technology platform that personalizes health plan members’ benefits, allowing them direct access to their plan’s benefits, ID cards, preferred providers and telemedicine.
The industry’s most active acquirer during the half year period was Bertelsmann SE & Co. KGaA with four transactions, each of which were completed through Relias Learning. Along these lines were the acquisition of WhiteCloud Analytics, a healthcare performance management technology company; Care Management Technologies, which offers evidence-based behavioral health analytics and decision support tools to payers and providers; Advanced Practice Strategies, an assessment, education, and analytics company that serves physicians and doctors; and Spm GmbH, which offers more than 300 courses for the acute and post-acute care sectors.
As for specific industry markets, volume in the Healthcare IT segment declined ten percent on a half year basis, from 99 to 89 transactions. The segment with the largest half year increase in volume was Consumer Health, which almost doubled from 10 to 19 deals. The Pharma IT segment also saw a rise in activity, from 16 to 28 transactions, a 75 percent improvement. Meanwhile, M&A volume in both the Pharma Business Services and Medical Information and segments remained about constant. The Healthcare Business Services segment, after rising 11 percent in second half 2016, experienced a 20 percent decline, from 49 to 39 deals.
“The industry is undergoing a rapid transformation and structural shifts due to reform, cost pressures, and shifting responsibilities between payors and providers,” said Jonathan Krieger, Managing Director at Berkery Noyes. “Private, best-of-breed technology-enabled healthcare IT companies that effectively address market niches, which have some level of scale, are in high demand by both financial and strategic buyers.”
“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,” added Jeffrey Smith, Managing Director at Berkery Noyes.
A copy of the HEALTHCARE/PHARMA INFORMATION AND TECHNOLOGY INDUSTRY M&A REPORT FOR HALF YEAR 2017 is available at the Berkery Noyes website.