Healthcare’s E-Health and Medical Device Sectors Positioned for Continued M&A Activity

The healthcare industry is faced with slow revenue growth, uncertainties resulting from healthcare reform and the economy in general.  As a result, hospitals and healthcare providers are looking to cut expenses and increase efficiencies or to consolidate in the hopes of streamlining operations and gaining pull with the industry payors.  As strategic mergers and acquisitions in the sector continue, private equity firms are positioning to capitalize on this industry in transition.  BDO, the national accounting and consulting firm, recently released a study, which showed 21 percent of private equity professionals (the second largest percentage of all respondents) see the greatest opportunities for new investments, during the next 12 months, in the healthcare and biotech industries.

As we work toward the final days of the 2nd quarter of 2012 I turn your attention towards two specific sectors of the healthcare industry; E-Health and Medical Devices. These sectors have garnered significant attention over the past several months.  It is likely these two sectors are positioned for continued M&A activity as the industry searches to improve efficiencies and reduce the cost of providing care to patients.

Let’s first look closer at the Medical Device sector, a group that regularly captures the attention for M&A activity.  According to the industry research publisher, Irving Levin Associates, when measured by the number of transactions, the Medical Device market has stayed at the top as the most active sector for M&A within the entire healthcare industry during 2012.  The first five months of 2012 has seen 73 medical device deals.  The following are a sampling of recent transaction activity:

  • Boston Scientifics’ offer to acquire Cameron Health was the largest announced in the entire healthcare Industry in March.  Under the terms of the deal the California based developer of the only commercially available wireless subcutaneous implantable defibrillator is worth as much as $1.35 billion.
  •  Hologic, a company focused on diagnostic & medical imaging systems announced in April it would be acquired by Gen-Probe in a transaction valued at 6.5X revenue for $4+billion.
  • Closer to home and in the smaller mid-market, HealthEdge Investment Partners in an undisclosed private transaction closed on its acquisition of a majority interest in LifeSync Corporation. This was a classic example of an acquisition by one of the many health care specialty private equity groups. HealthEdge assisted the Ft. Lauderdale based wireless EKG devices manufacturer to recapitalize its balance sheet, hire a new CEO veteran of the medical device industry and position it to grow organically and through acquisition.

The Healthcare Technology Sector also referred by many as E-Health has also been active, with Levin Associates reporting that 40 deals have been announced or closed since the beginning of 2012. At this rate, the E-Health industry is on track to exceed the prior year by a full 1/3rd greater number of M&A transactions.

Recent E-Health transactions of interest include:

  • The $40MM acquisition of federal health care systems specialist, Evolvent Technologies by IT giant ManTech International.  This is ManTech’s first move to enter the health care market.
  • ADP’s acquisition of PhyLogic HealthCare, a medical billing and physician revenue cycle management company.
  • The March 1st Letter of Intent signing between Florida based social media company ReachMeDaily.com and MediSwipe, Inc.
  • The $16.3MM value deal when Quality Systems (NASDAQ: QSII) acquired Matrix Management Solutions who is focused on revenue cycle management IT solutions among hospital-based physicians.

The healthcare Medical Device sector and E-Health sector are experiencing significant M&A interest and activity.  Driven by the healthcare industry’s needs to reduce overhead expenses, improve the operating efficiencies pushed by the Federal mandate to move to electronic records and at the same time the industry’s need to improve patient outcomes, E-Health and Medical Device companies will continue to be the focus of consolidations and M&A transaction activity.

If you have comments or questions about this article, or would like more information on this subject matter, please contact us.
David Jasmund

Investment Banking
djasmund@pcecompanies.com
Orlando Office

407-621-2100 (main)
407-621-2111 (direct)
407-621-2199 (fax)