Healthcare IT : IMAP Partner Report – May 2023

Our IMAP partner from the US has published their latest report on Healthcare Information Technology , titled “M&A Persists in Healthcare IT Market as Venture Capital Financing and IPO Markets Struggle” this May.

The report provides an update on the Healthcare Information Technology (IT) sector, focusing on M&A, venture capital financing, and IPO markets. It emphasizes the continued strength of M&A as a viable exit strategy, particularly due to the closure of the Healthcare IT IPO market and the slowdown in venture funding. The report highlights key takeaways, including the increasing focus on advanced technologies like artificial intelligence (AI) and machine learning (ML) in M&A deals, as well as the rise of strategic and financial buyers in the sector.

The report also covers the key themes from the 2023 ViVE conference, which include the growing role of AI in health data management, the demand for interoperable data, and the expansion of care delivery to the home. It further discusses the normalization of M&A volume in the Healthcare IT sector, with strategic buyers leading the activity and strong M&A valuation multiples.

Notable M&A transactions in the Healthcare IT sector are highlighted, including acquisitions of companies specializing in e-prescribing platforms, AI and ML platforms, telehealth services, and clinical software applications. The report also provides data on public companies in the Healthcare IT and telehealth sectors, including enterprise value, revenue, and EBITDA multiples.

“With limited options via the IPO market, and a dramatic slowdown in venture funding, Healthcare IT participants are likely to turn to the M&A markets to achieve liquidity in the foreseeable future.  Companies with innovative technology like AI and ML, and demonstrable revenue traction will  continue to be sought-after and will garner strong revenue multiples relative to historical averages.”

David DeSimone, Managing Director, Capstone Partners

Overall, the report emphasizes the robustness of M&A activity in the Healthcare IT sector, the impact of advanced technologies on deal trends, and the continued importance of M&A as an exit strategy in the current market environment.

The Healthcare IT sector is facing challenges in the capital markets, with the IPO market remaining closed and venture funding experiencing a slowdown. This has led to M&A emerging as the primary exit strategy for companies in the sector, particularly for those with innovative technologies like AI and ML. Strategic buyers are increasingly targeting both later stage and early stage startups with sophisticated offerings, indicating a broadening interest in the sector.

The report also highlights the steady long-term growth in the M&A market, with deal volume in Q1 2023 outpacing levels from previous years. Despite the rising cost of debt capital, private equity firms have maintained their presence in the space, engaging in add-on acquisitions to expand portfolio companies’ capabilities. Additionally, venture capital firms have become more risk-averse amid economic volatility, focusing on later stage financing rounds.

The document provides insights into specific M&A transactions, such as the acquisition of Winterlight Labs by Cambridge Cognition, demonstrating the demand for companies with innovative technology and revenue traction. The report also emphasizes the role of strategic buyers in driving Healthcare IT M&A activity, with a focus on acquiring companies with advanced technologies and strong growth potential.

In summary, the report provides a comprehensive overview of the Healthcare IT sector, highlighting the significance of M&A as an exit strategy, the impact of advanced technologies on deal trends, and the increasing interest from strategic buyers. It also offers valuable insights into specific M&A transactions and the overall market dynamics in the Healthcare IT sector.

You can download the full report from Capstone Partner website here :