Your Primer to Healthcare Mergers and Acquisitions
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Healthcare Technology: Update on Growth and Investments

Sep 27, 2022

by Anna Elliott

Volume 9, Issue 20, September 27, 2022

By Anna Elliott, Managing Director/Partner & Chris Conn, Business Development

In September, VERTESS Managing Directors, joined by members of the business development team, attended three national conferences: Cape Cod Symposium on Addictive Disorders, The National Association for Specialty Pharmacy Annual Meeting, and The Home Care Association of America Annual Leadership Conference. Dominating the tradeshow floors were exhibitors in the healthcare technology space. We estimated that these companies accounted for 40-60% of the exhibitors — a common thread intersecting the three different verticals represented at the meetings.

Such a substantial presence by companies in the IT space comes as no surprise. As EY recently noted, the technology sector drove global M+A activity in the first half of 2022. While the total value of the activity was down from record 2021 levels, technology still accounted for nearly a third of global M+A activity. Technology-focused deals are at double the level seen from 2015-19. 

Our experience at the September meetings served to further validate what we've been witnessing throughout the year: Healthcare IT is an area of tremendous activity, and one that's showing no signs of slowing down. Here are eight additional observations about the growth and investment interest in the sector.

  1. Areas of elevated interest. We're seeing a growing number of health tech companies focused on wellness, mental health, and home health care.
  2. Big players are aggressive. Some incumbent health tech companies — such as large electronic health record (EHR) vendors — are aggressively expanding their portfolios. They are working to take advantage of developments and improvements in areas such as interoperability, virtual health, cloud-based platforms, artificial intelligence, and other emerging technologies.
  3. Consumers embracing home health. Technology is helping consumers address more health issues from their homes, which can help keep them better connected to and supported by their care teams and ultimately out of the hospital and emergency room. Examples include telehealth, remote patient monitoring, and call centers. We're also seeing a lot of emerging technologies working their way into home health that are designed to help patients and providers. If home health continues to grow — and there's no reason to think it won't — we may see increased consolidation that creates highly concentrated healthcare markets across the country. We may see continued consolidation with integrated delivery networks that provide a continuum of care. We're also seeing new money from private equity going toward roll-up strategies. 
  4. Large provider organizations must be nimbler. Historically, large healthcare provider organizations have been slow to renew their technology stacks. Considering the significant improvements in existing solutions and the development of novel solutions, organizations may be wise to shorten — perhaps significantly — their typical renewal window. This can help with addressing some of the top challenges facing organizations (e.g., staffing, rising costs) while potentially opening the door to lucrative opportunities for those health tech companies looking to address parts of that overall value chain. This could lead to more manufacturing in the United States and further digitalization and automation of processes that would help drive down costs and improve efficiencies.
  1. Deep technology flexes its muscle. Deep technology (i.e., "deep tech") looks to be taking center stage in healthcare. Deep tech is essentially high-tech innovation in engineering. One company in the space that's generating buzz and demonstrates the potential for deep tech to disrupt healthcare is Simbo.AI, a startup out of Boston. The team at Simbo AI is working on cutting-edge technologies focusing on physician burnout and other use cases that have proven difficult to address. Simbo has created a high-tech robot — "AI Medical Scribe" — that can understand the most complex conversation between patients and physicians using neuro linguistic program processing. The company has invented a technology called BISLU (brain inspired spoken language understanding). This architecture converts voice to human thoughts directly.
  2. Healthcare sector lags others. We know the COVID-19 pandemic shined a spotlight on health tech as consumers turned to virtual health and other digital solutions to help them manage their conditions, reduce exposure risks, and stay better connected to their doctors and care teams. Even with the significant surge in health IT adoption, the healthcare sector is still catching up to more consumer-focused industries (e.g., finance, entertainment, retail) that have adopted technologies to better empower and engage their customers.

This lag has opened the door to new companies and solutions, and investors have been eager to get their money in early in the hopes that these businesses and their products will see rapid adoption. From appointment logistics to virtual care to the development of at-home testing kits, many niche companies have experienced significant upticks in funding largely attributable to the pandemic and its effects on care delivery and patient perception.

  1. Private equity has its targets. Our team has seen elevated interest from private equity firms in areas including virtual health, solutions that strengthen access and health equity, mental health technology, and consumer-driven platforms.
  2. Big trends for 2023. Two of the biggest trends we're expecting to carry over into 2023 concern preventable medicine and digital health. People are increasingly taking greater control over their healthcare and seeking proactive ways to stay healthier. This includes using everything from fitness wearables and other digital tools designed to support healthy routines, prevent chronic conditions, and foster healthier living. It's also encouraging to see a growing number of employers, many of which are faced with staffing challenges, offering wellness solutions such as health fairs, discounts to athletic classes, apps designed to reduce stress, and others. These can help keep employees healthier and happier while reducing sick days, employee dissatisfaction, and turnover.

Where Does Your Company Sit in This Market?

If you'd like to discuss your company's position in this current market and whether now would be a good time to pursue a sale or recapitalization, contact us. We'd welcome the opportunity to learn more about your business and discuss how we can work together to set yourself up for a successful 2023.


Thinking about selling your company? Unsure when you should start thinking about selling? Have general questions about selling? We're here to help. Email Anna Elliott Managing Director/Partner, at aelliott@vertess.com, or call +1.724.900.1377 or Chris Conn, Business Development at cconn@vertess.com or call +1.612.358.0707.

Anna Elliott, CM&AA

Anna Elliott, CM&AA CM&AA

Managing Director

Anna Elliott is a Merger and Acquisition / Business Development professional with over 15 years of experience working in high-growth, healthcare technologies with specific experience in Deep Tech, SAAS, Artificial Intelligence, Machine Learning, Ambient Solutions, and healthcare companies.

 

As a specialist in healthcare for her entire career, a key area of expertise for Anna is to appeal to healthcare technology firms and industries that are growing or merging via Mergers + Acquisitions. She is skilled in microtargeting related to needs and opportunities throughout the entire process of business supply and demand.  Her successes in this area have led to over $150 million in value to the organizations involved. In short, she is an expert in using technology to identify not only tasks that are at risk of failure but also opportunities that offer rapid, significant gains overall.

 

Anna furthered her career in M+A when she became a co-founder of a boutique Merger and Acquisition advisory firm in Pittsburgh, M&A Finders, where she found her passion for advocating on behalf of buyers and sellers with their M+A goals. She is excited to bring her skills and network to VERTESS where she has the resources needed to expand her footprint in the healthcare industry.

We can help you with more information on this and related topics. Contact us today!

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