Year-to-date M&A activity in the healthcare and pharma IT sectors is up 19 percent from this time last year, and some of the biggest deals have come from private equity firms, as reported by investment bank Berkery Noyes in its third-quarter trend report released Tuesday.
While volume and value of deals fell slightly overall from the second to third quarters of 2012, a few specific areas have seen great growth recently. M&A activity in healthcare business services jumped 20 percent from the second to third quarter, and the number of transactions in the medical information area more than doubled.
The most active acquirer year-to-date was New Jersey-based IMS Health Inc., which has announced five transactions this year including clinical trial-focused companies TTC LLC and DecisionView. While Roper Industries has had the highest-valued acquisition this year with its $1.4 billion buy of Sunquest Information Systems Inc., both deals point to a bigger trend in the industry.
“There is much interest in software solutions for the hospital and clinical laboratory markets,” said Jeffrey Smith, managing director at Berkery Noyes, in a statement. “The opportunity to integrate data and workflow is a key strategic driver in the provider environment, and supports higher quality care, patient safety and lower costs.”
Additional areas of M&A growth so far this year include electronic medical transcription services and medical speech recognition, evidenced by iMedX’s announced purchase of Electronic Medical Transcription Services and One Equity Partners’ acquisition of M*Modal for $1.1 billion.
The M*Modal deal demonstrates another interesting trend noted in the report: Acquisitions by private equity firms have accounted for less than a quarter of the transaction volume so far in 2012 but more than half of the deal value. Four of the 10 largest deals so far this year involved private equity firms.
Median revenue multiple has also gone up in the first three quarters of last year to the first three quarters in 2012 – from 1.8x last year to 2.1x this year, according to the report.
“Legislative incentives continue to increase the velocity of deal flow in the healthcare IT M&A market,” said Jonathan Krieger, another managing director at Berkery Noyes. “Focuses on the interoperability and connectivity of clinical and financial information are heavily dependent on enabling technologies. The healthcare payer side of the business is seeing a lot of deal activity as health insurers continue to diversify revenue streams and acquire third-party vendors.”
[Graph from Berkery Noyes report]