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2020: A Year Defined By Healthcare & DigitalThus far, the year 2020 has been defined byIn a similar vein, many pharmacy and prescription“healthcare”coronavirusmedication services now need to work online, too,pandemic has sent shockwaves through healthcareas individuals continue to avoid pharmacies andsystems across the world. Public and private healthmedical practices for fear of the virus, subsequentlysystems quickly risked paralysis from the outbreak andenjoying new levels of convenience. We thereforewere forced to confront the limitations and costs ofexpect to see more activity akin to Amazon’s 2018their processes. This – and the need for socialacquisition of PillPack in a crossover between thedistancing – caused an accelerated shift to digital,digital commerce and healthtech spheres.and“digital”.Thespeeding up the implementation of digital alternativeprocesses such as apps, telehealth and web-basedresources. In some cases, this shift was rapid – as ns. In others, it was extended andtroublesome – as with the implementation of the UK’strack-and-trace app, for instance.Overall, the shift to remote working and the stay-athome imperative have pushed telemedicine to theforefront. A McKinsey survey conducted among 213European physicians suggests that 55 to 58 percent ofthem believe that telemedicine will play a significantlygreater role in the future.1 12 Healthtech M&A Overview 2H 2020Furthermore, health IT services and BPO willgrow more as healthcare providers will acceleratedigitisation and reach the limits of in-houseimplementation and have no other choice but tooutsource to specialised third-party firms. These arelikely to reap the benefits of the crisis.Meanwhile, the most prolific acquirers such as Philips,TabulaRasa or Varian are, so far, laying low this year,but we expect them to come back strong in 2H2020and beyond once healthtech priorities become clearerand the global economy adjusts to a new set ofrealities.
M&A SummaryValuations retain momentumValuations in the healthtech space have been high forTransaction volume continues to increaseTransaction volume is on the rise, with 131the best part of the last five years. In the first half oftransactions recorded in 1H2020. This upward trend2020, the trailing 30-month median EV/S multiplesince a significant dip in 2H2016 and 1H2017 hasdipped slightly to 3x following a 4x peak in 2H2019.taken us back to the peak levels observed five yearsDespite previous volatility, EBITDA multiples are stillago. Meanwhile, 60 per cent of deals took place in Q1very high, coming in at 17.7x in 1H2020. This growthand 40 per cent in Q2 – a split which alludes to thehas been driven particularly by high valuations in thecautiousness of buyers after the markets crashed inHealthcare Vertical Software segment – the largestMarch 2020 (though they have since made a healthysubsector covered in this report.recovery).Total number of Healthtech M&A transactions and valuation multiples by half-year, x2.8x2.1x4.0x3.4x2.8x3.0x01H 20152H 20151H 20162H 20161H 20172H 20171H 20182H 20181H 20192H 20191H 2020Our Healthtech report covers the two-and-a-half-year period between January 2018 and July 2020. All totals and median values refer to the entire period unless otherwise stated.Median multiples plotted in the graphs refer to the 30-month period prior to and including the half year.Private equity remains prominent buyer groupPrivate equity firms became increasingly active in thesubstantial part of the buyer universe. Interest rateshealthtech space in the run-up to 2018; however, theare not expected to rise soon, and access to cheapmarket share of financial buyers has since decreaseddebt will continue to fuel these financial buyers’slightly. That said, financial buyers still constitute aacquisition 9%201510527263019282840353843391H 20152H 20151H 20162H 20161H 20172H 20171H 20182H 20181H 20192H 20191H 2020Transaction Volume (PE)2 12 Healthtech M&A Overview 2H 2020Share of PE deals across all Healthtech transactions (%)
Top Acquirers – PAST 30 MONTHSAlthough it featured at the top of the acquisition tablebetween 2017 and 2019, Philips has now beenovertaken by other healthcare giants such asTabulaRasa or Mediware – despite the fact thatneither of these companies made any purchases in2020 either.software provider H&S Qualità nel Software.In addition, Elekta AB, a Swedish company thatprovides radiation therapy, radiosurgery and clinicalmanagement for cancer and brain disorder treatment,acquired Finnish firm Kaiku Health in February. Kaiku’spatient monitoring software and mobile applicationCGM made two acquisitions just before thehas modules for more than 25 types of cancer and iscoronavirus outbreak, picking up the German andin use in over 40 European cancer clinics and hospitals.Spanish assets of Cerner, and Italian telemedicine.AcquirersAcquisitionsin 30 monthsThree most recent acquisitionsPrescribeWellness pharmacy engagement management SaaS4DoseMe individualised medication dosing SaaSCognify EHR management SaaSRock-Pond Solutions healthcare and pharmaceuticals analytics SaaS4BlueStrata EHR electronic health record management SaaSFazzi Associates home health & hospice BPOWashington & West healthcare denials & appeals management4AcuStream Inc. healthcare charge capture auditing SaaSCloudMed Solutions healthcare diagnosis validation SaaSNoona Healthcare oncology treatment tracking SaaS & mobile apps4humediQ global surface-guided radiation therapy software & hardwareEvinance Innovation clinical decision support SaaSCerner Corp. (DE & ES assets) healthcare practice management SaaS3H&S Qualita nel Software SpA telemedicine softwareQualizorg BV patient experience data management SaaSDigitize.AI healthcare AI-enabled ERP SaaS3PARO Decision Support LLC charity care predictive analytics SaaSConnance Inc. healthcare predictive risk analytics SaaSKaiku Health Ltd. patient monitoring software & mobile application3ProKnow Systems LLC radiation therapy analytics SaaSAcumyn quality assurance SaaSOrchard Software laboratory information management SaaS3Qualcomm Life Inc. medical data networking systemsConnecture Inc. insurance sales automation SaaS3 12 Healthtech M&A Overview 2H 2020
Trends, largest deals & subsector breakdown Regional deal-making sees European targetsacquired by more local acquirers First signs of deals influenced by Covid-19,e.g. deals targeting respiratory diseasedetection software Telemedicine services continue to thriveas Covid-19 pushes everything online andpeople steer clear of in-person consultations Private equity and financial buyerscontinue to invest and acquire, accountingfor almost a third of all transactions in thesector in the first half of 2020 Health IT services and BPO thriving ashealthcare providers reach the limits of theircapabilities and look to third-party firms forassistance Pharmacy and prescription servicesfirmly online in a new age driven byAmazon’s acquisition of PillPack in 2018Healthcare Vertical SoftwareHealthcare-specific software relating to hospitalmanagement, patient analytics or pharmaceuticals.Health IT Services & BPOConnectivity systems and outsourcing destined toimprove practice and patient experience.Online Health ServicesInternet-hosted services for patients, e.g. e-pharmacies,online health resources, e-learning platforms.LARGEST DISCLOSED DEALSOF 1H2020 5 billion10 MarVeritas Capital acquires thehealth & human services assets ofDXC Technology at 3.6x EV/S 600 million12 JanTeladoc Health acquires InTouchHealth at 7.5x EV/S 417 million04 MarAlign Technology acquiresexocad Global Holdings GmbH 249 million05 FebCompuGroup Medical SEacquires Cerner Corp. at 3x EV/Sand 17.1x EV/EBITDA 208 million01 JunChange Healthcare acquires PDXInc. 190 million13 JanR1 RCM Inc. acquires SCISolutions Inc. 180 million19 MayRevance Therapeutics Inc.acquires HintMDHealthcareVerticalSoftware61%Medical Hardware5%Online HealthServices6%EHR &InformationManagement10%EHR & Information ManagementElectronic health and medical records, datamanagement systems and software.Medical HardwareHigh-tech medical devices. NB: Medical Hardware is notexplored in depth in this report, as the deal pool is toolimited to offer any accurate conclusions.4 12 Healthtech M&A Overview 2H 2020Health ITServices & BPO18%
Geographical breakdownLAST 30 MONTHSOver the past 30 months, 63 per cent ofHEADQUARTERS OFHEALTHTECH TARGETSHEADQUARTERS OFACQUIRERS OF EUROPEAN TARGETSRoW3%NorthAmerica32%Europe63%European targets were bought by acquirersthat were also European. This figure is a littlelower for Q1 2020, before the coronavirusoutbreak.However, this number has jumped to 100per cent if we look only at deals closed in Q2NorthAmerica82%2020, pointing to more regional deal-Europe15%RoW5%making for 2020. This is likely to be due totravelQ1 2020andlocallockdownmeasures strongly impacting the prospects forHEADQUARTERS OFHEALTHTECH TARGETSHEADQUARTERS OFACQUIRERS OF EUROPEAN ental M&A.NorthAmerica44%Europe45%Europe12%RoW11%Q2 2020HEADQUARTERS OFHEALTHTECH TARGETSRoW2%HEADQUARTERS OFACQUIRERS OF EUROPEAN TARGETSEurope100%Meanwhile, across global M&A activity, NorthAmerican targets have maintained theirNorthAmerica76%Europe22%majority share of deals, accounting for 84 percent of all deals in Q1 2020 and 76 percent in Q2 2020.5 16 Enterprise Software M&A Overview 2H 2020
Healthcare Vertical SoftwareSub-sector overviewAlready the largest subsector within the healthcarerevenue multiple came in at 3.6x, while the EBITDAspace, in 1H2020 the Healthcare Vertical Softwaremultiple reached a high 17.3x.segment saw the most transaction volume on recordwith 88 deals – a 20 per cent increase on the lastreporting period. In fact, transaction volume hasgrown consistently since 2017.It is also worth noting that, while previous EBITDAmultiples on the below graph were very high, theyincluded a handful of exceptional deals which closed athigh EBITDA multiples ( 50x). Thus, it is safe to sayOn the valuation side, so far 2019 has not beenthat the current median is more representative ofbeaten. In 1H2020, the trailing 30-month medianvaluation trends in the 3.2x2.8x2.7x2.8x4.5x4.3x3.6x1H 20152H 20151H 20162H 20161H 20172H 20171H 20182H20181H 20192H 20191H 2020Respiratory illness stays front of mindGiven the concern over respiratory illnesses as aThrough the deal, AireHealth adds to its capabilities allresult of Covid-19, this deal came as no surprise.of BreathResearch’s assets including employees,AireHealth, an American provider of respiratory careintellectualmanagement througha mobile app, acquiredw. orks. AireHealth alsoBreathResearch, a respiratory healthcare firm thatgains all patents sproperty,respiratorydelivery,caregivers and clinicians to be more informed inadherence and analysis ofrespiratorybreathing sounds ns and translating to fewer emergenciesmachineand fewer hospitalisations.artificial intelligence.6 12 Healthtech M&A Overview 2H 2020learningandpublisheddrugVitalBreath virtual care software helps patients,care,researchand03 JunACQUISITIONNot disclosed
Healthcare Vertical Software (cont.)Invitae targets pharmacogeneticsIn March, Invitae, the publicly-listed medical geneticsGenelex offers pharmacogenetic testing that analysescompany, purchased YouScript, a clinical decisionthe genes that are important for understandingsupport and analytics platform, for 79 million; andvariation in how people metabolise and respondGenelex, a pharmacogenetic testing company, for 20differently to prescription medications. The testingmillion.process includes pharmacist review, patient- andAccording to the acquirer, despite its broad utility, theincorporation of pharmacogenetic information intoclinician-facing reports, as well as access to clinicaldecision support for the treating provider.routine medical care has been slow. CombiningGenelex testing with clinical decision support usingYouScript software allows clinicians to easily navigatethis information when making prescription choices atthe point of care.10 Jun10 JunACQUISITIONACQUISITION 79 million 20 millionYouScript’s software pairs a patient’s pharmacogeneticprofile with published drug and gene interactioninformation to assess the risk for adverse drug eventsand possible side effects. Health systems can also useThe use of YouScript in combination with Genelex hasYouScript at population scale to identify patientbeen shown to reduce adverse events, costs andpopulations at highest risk for adverse events.hospital readmissions.7 12 Healthtech M&A Overview 2H 2020
Health IT Services & BPOSub-sector overviewAfter a strong rebound in 2H2019, transaction volumeAlmost all the transactions in this segment werein this segment declined again in 1H2020, with 15carried out between a north American buyer anddeals recorded. However, the trailing 30-monthnorth American seller.revenue multiple remained stable, coming in at 2.4x.There were not enough disclosed EBITDA multiplesto warrant a reliable trailing 30-month medianEBITDA .4x151.2x1.2x1.2x1.1x1.3x1.5x1.0x1050.5x-0.0x1H 20152H 20151H 20162H 20161H 20172H 20171H 20182H20181H 20192H 20191H 2020Segment sees largest dealThe Health IT Services & BPO segment saw theThis is not the first time Veritas Capital and DXClargest deal in 1H2020. In March, private equity firmh. ave worked together.Veritas spent 5 billion on the health and humanIn 2018, components ofservices business of DXC Technology, i.e. the assetsVeritas’which provide health software consulting andVencore and KeyPoint,business,integration for Medicaid hospitals and healthcarealongproviders in the US. For instance, DXC HHS enablesfederal business, wereusers to manage patient health records, monitorfoldedquality of care in real-time, and manage bookings andcreate the DXC spin-admissions,off on, pharmacy and mortuary processes. DXCsaid it would use the proceeds from this sale of theMedicaid services business to pay down debt.8 12 Healthtech M&A Overview 2H 2020withDXC’stogetherto10 MarACQUISITION 5 billionHealth and humanservices assets
Health IT Services & BPO (cont.)Cerner divests underperforming RCM unitEHR giant Cerner shed its German and Spanish assetsAcquirer R1 has remained largely unaffected by theto CGM in February and followed with the sale of itspandemic, reporting a revenue spike of more than 16underperforming RevWorks business to R1 RCM inper cent year over year in the first quarter. TheJune for 30 million. With the deal, Chicago-based R1.17-year-old RCM playergains access to RevWorks’ commercial, non-federalhasclient relationship. Cerner will also extend R1’s EHR-campaignagnostic revenue cycle capabilities to its clients andgrowthnew prospects.solidify its position in theAccording to Healthcare Dive, the multi-billion-dollarunsaturated market, alsorevenue cycle management (RCM) sector has fewplayers but is expected to grow as hospitals strugglingwith suboptimal collections rates and weakeningmargins look to outsource back-end functions.9 12 Healthtech M&A Overview 2H entengagement player SCISolutions in April.3 JunACQUISITION 30 million
EHR & Information ServicesSub-sector overviewSeveral successive reporting periods since 2016 wereEV/S multiples have seen some volatility over thecharacterised by volatility and an overall decline inyears but remain resilient overall, as the trailing 30-transaction volume. However, off the back ofmonth median remains just below 3x.renewed momentum in 2018, deal volume climbedback to higher levels in .5x-0.0x1H 20152H 20151H 20162H 20161H 20172H 20171H 20182H20181H 20192H 20191H 2020Harris invests in EHRIn February, software giant Harris acquired Doc-UK sees rare deal in the spaceIn May, public company Induction Healthcare GroupTor.com. An American firm based in New Jersey,acquired Zesty for 15 million. Zesty provides patientDoc-Tor.comcloud-basedmedical records management SaaS in the UK, allowingpractice management systems for physician offices,patients to consult their clinical record, manageallowing for efficient workflow and schedulingappointments,through collections and analytics. The Doc-Tor.comfeedback and attend remote consultations. Throughtransaction also included the acquisition by Harris ofthe acquisition of Zesty, the Induction Group will beNew Ultimate Billing LLC, a full-service revenue cycleable to coalesce platforms that integrate patients,management (RCM) provider with 20 years of.clinicians and healthcarecombined administrative leadership and medical billinginformationexperience.Doc-across multiple sites andoperateEPRs. By pooling in Harris’s AmazingCharts business unit, andUltimate Billing will be atheNot disclosedtheir products faster enewgroup hope to developACQUISITIONofsolutions.10 12 Healthtech M&A Overview 2H 2020correspondence,providesources10 Febstand-alone business unitthereadtheirgrowth19 MayACQUISITION 15 million
Online Health ServicesSub-sector overviewIn 1H2020, transaction volume in this segment hasEV/S multiple came in at 3.8x – lower than 2017 orreturned to healthier levels. Revenue multiples have2018 but higher than the multiples seen five years ago.also remained stable, as the trailing median 8x61.5x41.0x20.5x-0.0x1H 20142H 20141H 20152H 20151H 20162H 20161H 20172H 20171H 20182H 20181H 20192H20191H2020Emergency response software garners interestIn March, Central Research Inc (CRI), a provider ofEdtech and healthcare collide in 2020In May, private equity firm LLR Partners acquiredcustomisedserviceTrueLearn, a subscription-based online medical examsolutions for the public and private sectors, acquiredpreparation service, for an undisclosed amount.GlobalTrueLearn was previously owned by Kian ered in Georgia, GER provides web- andmobile-based software for emergency status trackingand situational awareness information, for healthcare,emergency response and governmental organisationsin the US. The software includes features for patienttracking, incident coordination, resource tracking andf. amily reunification. TheortheCalifornian wildfires have16 Marcasehas expanded its offerings beyond physician educationto adjacent healthcare markets including pharmacy andallied health. This shift has helped meet rising needs ofschools,alliedhealthcareprograms, which seek toNot disclosedtrain learners in remoteneed for adequate digitalinclassroom environments. In recent months, TrueLearnACQUISITIONno doubt reiterated thesolutionsinstitutions adjust to asynchronous and remoteresidency programs andcoronaviruspandemicthose offered by TrueLearn are in high demand as.medicalevents of 2020 such astheAccording to PE Wire, e-learning solutions such asofemergencies.11 12 Healthtech M&A Overview 2H 2020settings, while continuingto address the problemof healthcare workforceshortages.29 MayACQUISITIONNot disclosed
Conclusion & ContactsIn the six months since the publication of Hampleton Partners’ last healthtechreport, the pressure on health systems has reached unprecedented levels as the
4 12 Healthtech M&A Overview 2H 2020 Healthcare Vertical Software Healthcare-specific software relating to hospital management, patient analytics or pharmaceuticals. Health IT Services & BPO Connectivity systems and outsourcing destined to improve practice and pa
