Mergers and acquisitions in the health care industry are on the rise, according to a report from midmarket investment bank Berkery Noyes. The report found that trading volume for M&As in the health care industry increased 7 percent from the second quarter to the third quarter of 2013, while total transaction value fell 68 percent over the past three months, from $6.3 billion to $2 billion.
Deal volume in the pharmaceuticals IT segment increased 33 percent year-to-date when compared with the corresponding period in 2012, according to the report, as the convergence of advanced knowledge management technologies with new data analytics is enabling pharmaceutical suppliers to reduce both the risk and time to market of developing new drugs while improving their safety and effectiveness.
The report analyzes M&A activity for the sector during the first three quarters of 2013 and compares it with data covering 2012. The market includes information and technology companies servicing the pharmaceutical, health care payer and health care provider spaces.
The largest transaction in third quarter 2013, as well as the overall industry's highest value deal in the quarter, was Vitera Healthcare Solutions' announced acquisition of Greenway Medical Technologies for $632 million in enterprise value. Other notable deals in the segment included Zotec Partners' acquisition of Medical Management Professionals, a medical billing and business management services company, for $202 million.
"Health care deal flow continues to be strong for companies developing proprietary technology/content, of scale in their markets, high revenue growth (double digit), high percentage of recurring revenue and large total addressable market opportunity. At the same time, demand for advertising support or sponsored journals and CME events is very soft," Tom O'Connor, managing director at Berkery Noyes, said in a statement.
The health care IT segment underwent a 56 percent volume increase on a quarterly basis. It also accounted for nearly half of the industry's aggregate M&A volume, as opposed to 31 percent in the prior quarter.
"The health care market remains highly fragmented, with lots of opportunities for entrepreneurs with unique ideas looking to start companies that solve important pain points along the health care continuum," O'Connor said. "Large strategic buyers are also looking to acquire unique content/software solutions that are solving challenges in the health care market and are growing rapidly, offering exit opportunities for entrepreneurs at very attractive prices."
The report projected the M&A environment for information and technology companies serving the pharmaceutical market to remain robust over the next 12 to 24 months. Another area of growth was the revenue cycle management subsector, which saw a 67 percent increase in volume on a quarter-to-quarter basis.