Healthcare Tech M&A Deal Values Soared in 2018 – And 2019 Looks to See More of the Same

Healthcare Tech M&A transactions hit an all-time high deal value in 2018.  In 2017 there were 95 healthcare technology transactions at a total announced value of $6.6B.  In 2018, there were 103 closed transactions with announced value of $11.9B – an increase in total deal value of 80% over 2017!  The Median Revenue Multiple was 5.00.

Deal value was pushed skyward by several Billion dollar transactions.  The largest deal of 2018 (and in fact, the largest in 451 Research’s Database dating back to 2002) was the announced acquisition of athenahealth Inc. by Veritas Capital and Evergreen Coast Capital for $5.7B in November. The transaction sees athenahealth being combined with Veritas-owned Virence Health, but continuing to operate under the athenahealth name and remaining in its Watertown, Massachusetts, headquarters. Athenahealth provides network-enabled services for healthcare and point-of-care mobile apps.

The next largest transaction was the acquisition of Flatiron Health Inc by Roche Holding AG in February for $1.9B. Flatiron Health provides a web-based business and clinical intelligence data platform to connect researchers and patient data to help improve quality of care and find more effective cancer treatments, faster.

The two additional transactions include the acquisition of GE’s healthcare unit by Veritas Capital in April for $1.05B and the acquisition of M*Modal by 3M Company in December for $1B. GE Healthcare has a wide array of solutions that address many facets in healthcare including diagnostic imaging, equipment, and patient monitoring systems. M*Modal provides tech-enabled solutions for streamlining EHR documentation.

The healthcare sector is undergoing a massive shift as legacy systems that have remained largely unchanged for years must now make way for new innovations and the adoption of new technologies designed to streamline processes and deliver better quality services.

M&A Trends in Healthcare Technology 2010 – January 2019 

The most active buyers in this sector were all strategics (albeit several are backed by PE firms):

As digital technologies like Artificial Intelligence (AI), machine learning, Internet of Things (IoT), Big Data, User Experience, and more converge, and as tech behemoths like Amazon enter this market, a perfect climate is being created for companies with solutions or services in great demand to explore acquisition or funding.

Although we’ve seen a recent stock market correction, many analysts feel that rather than dampen M&A in 2019, deal volumes are likely to hold steady or even increase slightly as companies that may have been sitting on the sidelines as a result of heady valuations last year may now feel more comfortable exploring opportunities as they feel valuations are more likely to align with current market conditions.

What does this mean for founders and shareholders at mid-market and smaller firms?

Historically, a wave of additional M&A in the mid-market follows large transactions in a vertical market as companies start to pursue add-on opportunities post-transition to round out their offerings and to fill in any needed capabilities.

Most analysts believe that we have reached the peak of the current economic cycle.  We haven’t seen market conditions this good in almost two decades and many shareholders have chosen to capitalize on this.  For those still contemplating their options, something to consider is that the M&A market is cyclical. The current peak will be followed by some type of market correction or softening (or worse) as we look out towards the end of 2019 and into 2020.  Shareholders would be wise to review market indicators and determine whether it makes sense to capitalize on this peak now or to wait for another (what will likely be) 5+ years for a similar frothy market to re-emerge.

We are currently tracking dozens of companies seeking the right acquisition target as a result of our recent work with our recent successful transaction in this market and we would be happy to talk with your further about your firm’s current state of readiness and what you might expect should you choose to explore your options in the broader market or if you have recently been approached by one or more interested parties.


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