Data / Empowering High Performance

Recent government healthcare reform initiatives have initiated a rush of merger and acquisition activity within the industry. Both healthcare providers and vendors are seeking to consolidate resources in order to remain as competitive as possible. A big impetus behind M&A activity within this market is the need for organizations to find reliable, long-term investment so they can stay up-to-date with technologies related to electronic medical records (EMRs), health information exchange (HIE) and accountable care.

Last year ended with healthcare M&A activity up close to 50% over the previous year, with nearly $4 billion invested in some 85 deals, including:

• Allscripts/Eclipsys
• Oracle/Phase Forward
• Hyland Software/eWebHealth
• Thomson Reuters/ProfSoft
• United Health-Ingenix/Axolotl
• Aetna/Medicity

All newsworthy, to be sure - especially because the last two signaled massive payer interest in the HIE solutions market - but were in fact just the tip of the iceberg. The top five M&A deals in healthcare amounted to almost $3 billion.

Venture capital (VC) also had a big part to play in the industry, especially with regard to healthcare IT, which saw $211 million in funding from 62 different investors across 22 deals. More than $600 million was also raised by healthcare IT companies through various forms of debt and credit facilities.

These statistics paint a rosy picture for the financial state of the vendor sector. The good mood was definitely felt on the HIMSS show floor, with many Porter Research clients, like Halfpenny Technologies and Phreesia, reporting great foot traffic at their booths. Porter talked with many investment companies at the show wanting to chat about the latest healthcare M&A activity.

As Porter works with ST Advisors to compile nominations and rankings for Healthcare Informatics magazine's annual Top 100 list of healthcare IT vendors by revenue, a clear picture of a changing industry is emerging. This year will likely see continued, if not more frenetic, M&A activity. But as ST Advisors President Ben Rooks says, "I see as much opportunity in the space for new entrants as I ever did, if not more. While I do think valuations (both public company and M&A) are perhaps ahead of themselves, the underlying fundamentals that make healthcare IT exciting are still present and continue to accelerate.

Time will tell, once the side effects of healthcare reform have subsided, if mergers and acquisitions, as well as new competitors, will help sustain the industry.

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Additional Suggested Reading:

Make the Most of Market Opportunity with Merger & Acquisition Research



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