Categories: Technology

VC firms have been funding, and M&A transactions should continue to increase in the health information technology (HIT) sector

“We are gearing up!”  I heard this statement and other similar statements from many VC firms when I recently attended “The World Congress Annual Leadership Summit on Mergers & Acquisitions in the Health Care” in Orlando, Florida.  Consistently, panelists and attendees at the conference noted that VC firms are funding for M&A transactional opportunities within the heath information technology (or HIT) sector.  According to many managing directors who spoke at the conference, there will be many such transactions because many hospitals and health systems throughout the country may need to update their older systems to keep up with emerging technologies that allow for better care for patients.  During 2012, many VC firms have been involved in numerous HIT deals.  For the remainder of 2012 and beyond, those firms are forecasting a wave of new technology, which should include, in addition to a complete overhaul of computer systems, an expansion of new applications to run on those computer systems in order to better help providers and patients within the healthcare sector.  Strong M&A activity within the healthcare provider IT market should continue as a result of solid demand for quick, efficient technologies and lower healthcare costs.

According to Mercom Capital Group, LLC, a global communications and consulting firm:

  • VC funding in the HIT area in Q1 2012 was $184 million in 27 deals (the highest number of deals ever recorded since Mercom started collecting data in Q1 2010).
  • A total of 46 different VCs invested in Q1. 
  • In Q1 2012, M&A activity in the HIT sector was strong with 34 M&A transactions.

The increase in M&A activity could lead to more technologies “merging” to build better systems for information, storage and transporting health care data, and communication for decision making.  In addition to better utilization, the increase in the implementation of HIT may lead to:

  • Lower health care costs
  • Increased access to affordable care
  • Fewer mistakes
  • Improved care quality
  • Improved organizational efficiencies
  • Reduced administrative burdens

Healthcare Growth Partners, an investment banking and strategic advisory firm, has concluded recently that “the HIT surge shows no signs of subsiding”, and overall, there is a lot of optimism around the opportunity within the market…private equity interest is high and valuations are often equal to or above strategic estimations.

It appears that the M&A market in the HIT sector has been hot since Q1 2012 with new technologies and opportunities in health care available.  VC firms appear to be concentrating on technologies that help lower costs and improve the quality of care.  The conference was a chance to hear firsthand from VC firms who have been carefully planning their strategies with regards to HIT.  Now appears to be the time that these firms are stepping up to the plate; hoping that they won’t swing and miss.


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