Robust activity for healthcare IT M&A

Mergers and acquisitions activity in the healthcare information technology sector jumped 21% in terms of transaction volume in 2012 compared to the past two years, according to a recent report from Berkery Noyes, an independent midmarket investment bank. The “massive” shift to electronic solutions in the healthcare industry is driving growth and creating favorable investment opportunities.

The Healthcare/Pharma Information and Technology Industry report analyzes M&A activity for the industry that includes information and technology companies servicing the pharmaceutical, healthcare payer, and healthcare provider spaces.

More deals: The IT segment of the healthcare industry, which saw an 11% increase in M&A deal flow in 2012, accounted for 41% of the industry’s aggregate transaction volume.

“The robust level of M&A activity shows that there are plenty of desirable, fast-growing companies—many privately owned and SaaS enabled solutions—that are attracting very high multiples and appealing to both strategic and financial acquirers," said Tom O’Connor, managing director at Berkery Noyes. "In addition, the expiring favorable tax treatment on capital gains helped push some sellers to complete transactions this year. We expect to see a lot of smaller, SaaS-enabled solutions in attractive niches and rapidly growing companies come to market in 2013 and attract robust prices.”

SaaS is a key concept in healthcare IT solutions. It means “software as a service,” which is in the realm of cloud computing. Under this setup, software applications are rented, and all processing work and file saving is done over the Web. The SaaS provider has data centers and maintains the hardware and software—essentially an outsourced arrangement. From a financial standpoint, it’s attractive to the user because there’s no upfront investment in hardware or software and no ongoing maintenance headaches, so there’s less of a need for in-house IT support.