Global healthcare remains one of the most stable sectors due to its resilience to the economic cycle and non-discretionary characteristics. Combine this with strong fundamentals, and the sector is an increasingly attractive proposition for financial investors and strategic acquirers.
There are nuances between different subsector growth rates. Digital healthcare is often hyped as the next big growth market, but it is taking time for the market to evolve. With growing inflationary cost pressures on healthcare provision and an ageing demographic, the delivery of care is gradually shifting towards integrated care platforms that are supported by technology. Telehealth, data analytics and mobile health (mHealth) are increasingly being adopted across healthcare markets.
Global investment in digital health is accelerating and 2017 forecasts are suggesting it will reach record levels of over $10 billion. It has been reported that in the last quarter alone, investment exceeded $3 billion across almost 300 deals, the highest level of funding in the past four years. Recent examples include Telehealth provider Medvivo enhancing its clinical technology offering through the acquisition of Expert-24 and Glooko, the US-based company engaged in developing diabetes patient management applications, raising £27m to deepen its expertise in data analytics.
A diverse group of acquirers is driving M&A activity and they are particularly interested in those businesses offering clear value-add services that cannot be replicated in-house. Examples include Athenahealth’s £49m acquisition of Praxify Technologies, the US-based provider of EHR software solutions for clinicians; IBM’s £1.8bn acquisition of Truven Health Analytics from Veritas capital; and Allscripts’ recent £48m investment in NantHealth’s patient engagement business. If businesses have a unique product or have achieved scale, viable and attractive exit opportunities exist.
Investment into the digital health sector has been growing for years, with 2017 on track to reach record levels of over $10B. Last quarter saw the highest quarterly funding in the past 4 years, reaching $3.2B across 290 deals.