Mergers and acquisitions across healthcare, pharma and health IT are on the rise, having increased by 18 percent since the second half of 2013, with health IT outpacing all other segments, according to a report from Berkery Noyes.
The aggregate value of all healthcare M&A activity jumped 46 percent to $5.45 billion from $3.73 billion. Health IT M&A deal volume was up 17 percent, going from 65 transactions to 76, according to the report – the largest increase on a half-year basis throughout the past two-and-a-half years.
Notable Health 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, the report said.
The independent mid-market investment bank’s report analyzed M&A activity during the first half of 2014 and compared it to the four previous six-month periods from 2012 to 2013. The report includes companies across a broad healthcare spectrum, including health IT, pharmaceutical, payers and providers
In a statement, Berkery Noyes Managing Director Tom O’Connor said the health IT marketplace is “rapidly changing,” and that “both strategic and financial buyers are on the hunt for attractive acquisitions of scale.” Whether long-term care information, education, technology providers, revenue cycle management, point-of-care information or any other attractive niches, healthcare companies in these areas “are in high demand.”
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.”
He also noted that there remains a “lack of quality assets of scale available,” making any attractive asset that much more valuable to multiple buyers.
“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,” fellow Managing Director Jonathan Krieger said.
Pharma IT also 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 life cycle 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.
Driving those areas is a heightened emphasis on data, science, pharmacoeconomics and “comparative effectiveness,” the report said, adding that continued emphasis will likely occur in the life sciences space on proprietary intellectual property assets, new software analytics, regulated content solutions, patient engagement, and mobile and global platforms.