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Berkery Noyes Releases Healthcare/Pharma Information and Technology Industry M&A Report For Third Quarter 2016

Wednesday, October 19, 2016

NEW YORK — October 19, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2016 mergers and acquisitions trend report for the Healthcare/Pharma Information and Technology Industry.

The report analyzes M&A activity for the sector during the first three quarters of 2016 and compares it with data covering 2015. This market includes information, technology, and digital companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

Transaction volume year-to-date saw a slight uptick compared to the corresponding timeframe in 2015, from 338 to 341. Aggregate deal value more than doubled, from $10.7 billion to $22.1 billion. Of note, there were three multibillion dollar deals thus far in 2016, as opposed to none during the same period in 2015. In terms of year-over-year valuations, the median revenue multiple remained nearly constant at 2.6x while the median EBITDA multiple rose from 10.4x to 13.9x. 

The industry’s highest value third quarter deal was private equity firm EQT’s announced acquisition of Press Ganey Associates, a healthcare performance improvement company that offers patient experience measurement, performance analytics and strategic advisory solutions, for $2.4 billion in the Healthcare Business Services segment. In the second quarter, Press Ganey completed a deal of its own with the acquisition of Avatar International Holding Company, a provider of patient experience and satisfaction surveys used by hospitals, clinicians, and others.

Deal flow in the Healthcare IT segment stayed about the same over the past quarter. This followed a 27 percent increase in the second quarter. Notable Healthcare IT deals during the last three months included Thoma Bravo’s acquisition of Imprivata, a provider of authentication and security solutions used by hospitals, for $544 million; Atos’ announced acquisition of Anthelio Healthcare Solutions, which offers healthcare technology solutions to hospitals, physician practice groups and other healthcare providers, for $275 million; and Evolent Health’s announced acquisition of Valence Health, a healthcare IT company that provides an integrated set of population health technology and managed services, for $144 million.

M&A activity in the combined Pharma IT, Pharma Business Services, and Pharma Information segments increased 74 percent on a year-over-year basis, from 34 to 59 transactions. The largest deal in the Pharma related segments during the third quarter was Inovalon’s acquisition of Creehan & Company, a provider of specialty pharmacy and medications management SaaS platforms, for $105 million.

“Strategic players, many flush with cash, highly profitable and boasting strong balance sheets, are actively looking for acquisition opportunities,” said Tom O’Connor, Managing Director for Berkery Noyes. “We anticipate healthy transaction volume among strategic buyers looking for tuck-in and bolt-on acquisitions that deepen their market penetration and strengthen their offerings. In addition the credit environment is highly favorable for attractive deals. Particularly where a high percentage of revenue is recurring, credit providers are being aggressive in valuation and terms.”

“Healthcare providers are increasingly adopting software solutions to maximize efficiencies amidst a declining reimbursement rate environment and a more complex claims coding process,” stated Jonathan Krieger, Managing Director at Berkery Noyes. “Buyers are also looking to acquire software vendors that effectively address increased regulatory scrutiny and structural changes brought on by reform.”

According to Jeffrey Smith, Managing Director at Berkery Noyes, “There is much interest in software solutions for the hospital and clinical laboratory markets. 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.” Smith continued, “We expect to see continued robust new business formation in the pharma commercialization space, with an emphasis on proprietary intellectual property assets, new physician databases, new software analytics, unique workflow and process solutions.”

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