The Healthcare IT sector is ripe for an active year in venture investments and M&A. The U.S. government poured $20 billion into the industry in 2009 and recently announced plans for more incentives to upgrade the nation’s paper medical records to electronic files. Already in the first two weeks of 2010 there have been a handful of M&A transactions and investments within the sector, and we expect there will be plenty more announced.
Recent research shows the 2008 global market for Healthcare IT was valued around $11 billion, and estimates show that it will expand to more than $24 billion by 2015, with a compound annual growth rate of around 11%. The US is the key economy driving growth within the sector globally, contributing 37% of all spending in 2008 and an expected contribution of up to 48% by 2015, as the U.S. market alone grows to over $10 billion.
M&A activity for the Healthcare IT sector is expected to remain strong through 2010. Three acquisitions have already been announced in the first full week of the year: Lawson Software’s $160 million acquisition of Healthvision Solutions; AdvancedMD Software’s acquisition of PracticeOne; and TransUnion’s purchase of MedData (no financials disclosed). But the sector is also bringing in venture investments, such as Andromeda Capital’s $1.25 million investment in TheraSim, a Durham, N.C.-based provider of online tools to reduce performance errors in healthcare and clinical research.
Government financial incentives, and regulations requiring automation in healthcare practices, are expected to be the main drivers in the sector for the next several years. But the use of mobile devices could also spur growth and M&A as the way patients are being monitored and treated is transforming. Software start-ups are now allowing insurers and doctors to care for patients remotely, such as by sending automatic alerts through e-mail or text messages. Other companies, such as Cisco and American Well, allow for doctors and patients to connect using Internet video chat.
M&A in 2010 is expected to be significantly better over the next few years for all sectors, and Healthcare IT has the right formula for increased activity. As venture and private equity firms start to see increases in fundraising, we may find more financial buyers looking to take advantage of value the space.
By Jacquelyn Viskovich and Chase Sanders
