The first half of 2018 saw record private equity investment and five multi-billion-dollar deals in healthtech sector, pushing the total disclosed transaction value to $13.4 billion, with data managment and analytics being one of the key drivers.
The latest Healthtech M&A Market Report by Hampleton Partners shows the sector’s largest deal in the first half year was the $4.9 billion cash acquisition of Cotiviti Holdings, a healthcare analytics and payments business, by Verscend Technologies, a portfolio company of Veritas Capital.
The acquisition, valued at 19.7 times EBITDA and at a 136% premium to Cotiviti’s IPO common stock price, demonstrated the heightened willingness of private equity investors to chase big-ticket deals in healthcare.
The healthtech sector’s second largest transaction was the $2.1 billion offer from Platinum Equity for Johnson & Johnson’s LifeScan unit, a manufacturer of blood glucose monitoring systems.
In third place was the $1.9 billion acquisition of Alphabet-backed Flatiron Health, an electronic health record software specialist with a focus on oncology, by Swiss drugmaker Roche Holding, adding to its existing stake, for a total value of $2.1 billion.
The two other private equity deals that made it into the top ten biggest transactions were the $1.05 billion cash acquisition of General Electric’s health-care technology unit by Veritas Capital and Vista Equity Partners’ investment in software company Allocate.
Hampleton Partners director and healthtech sector principal Jonathan Simnett said: “The data revolution is helping transform healthcare and is offering individuals, as well as clinicians, the opportunity to track, manage and improve health in real-time by using wearables and personalised apps.
“These trillions of health and well-being data points all need monitoring and analysing to provide the effective diagnostics that practitioners need to improve outcomes. Hampleton expects companies expert in big data analytics, and those using new technologies such as blockchain and artificial intelligence, which increase the effectiveness of healthcare services, are going to be in demand going forward.”
However, the sector the highly acquisitive incumbents such as Philips, IMSHealth, Allscripts, Ability, Roper and Harris, are also facing competition from tech giants.
Amazon’s purchase of online pharmacy PillPack, for a reported value of just under $1.0 billion, underscores the company’s ambitions in healthcare after its joint venture announcement for employee healthcare services provision with Berkshire Hathaway and JPMorgan.
The potential for Amazon to combine its ecommerce, video platform, massive outsourced web services expertise and customer reach into a one-stop shop for consumer verticals like healthcare, could trigger further defensive acquisitions in the months and years to come, the report claims.
Simnett continued: “Ageing populations, increasing patient demands and the rise of lifestyle diseases, coupled with pressure on service delivery budgets are forcing public and private healthcare providers faced with unsustainable care models to innovate to improve the quality of delivery and lower costs.
“This is prompting tech giants, including Amazon, Apple, Google and IBM to target the healthcare sector in competition with private equity, but they’ll all face strong competition for deals from incumbent healthtech providers, many of whom are under growing pressure to maintain their top-line organic growth and sharpen their market focus. This is all good news for healthtech companies considering an exit in coming months.”