2019 Q3 HIT Sector Report

  • Global M&A dollar value of closed deals declined by 13% for Q3 2019 to $728B compared to Q2 2019 but ↑128% YoY.  North America M&A was↑ 2% QoQ and 145% YoY.The lack of mega deals in Q3 vs. Q2 contributed to virtually same $ volume.
  • Global Private Placements totaled $121B in Q3 2019, ↓ 3% from Q2, and ↓ 46% YoY. North American Private Placements for all
    sectors totaled $46B, ↓ 12% QoQ, and the deal count decreased ↓ 5% QoQ.
  • In N. America, the Digital Health M&A deal count decreased on a QoQ basis ↓7% and YoY basis ↓32%. Announced dollar
    volume decreased ↓91% on QoQ, and ↓87% YoY. The larger deals with announced size were in Clinical Data/Pop Analytics-
    Genomics and Business Intelligence, included Crossix Solutions Inc, and OmniComm Systems, Inc

    • For Q3 2019, EHR/PM was the most active in terms of deal count, representing 24% of the M&A deals.
      Interoperability/Encryption and RCM/Billing/Coding accounted for 16% and 14% of M&A deals, respectively.
  • The number of Private Placement transactions in the N. American Digital Health sector decreased in Q3 2019 by 30% QoQ
    and 60% YoY.      Disclosed dollar investments in N. American based HIT firms was $1.9B in Q3 vs. $1.7B in Q2

    • The Patient Engagement/Monitoring/Wellness Coaching subsector was the most active subsector in Q3 2019, representing 20% of Private Placement deals.
  • There were three Digital Health IPOs in Q3 2019 and one corporate spin off.  Health Catalyst, Livongo Health and Phreesia went
    public at the end of July, raising $182 million, $355 million and $167 million, respectively.

    • Also of note, Change Healthcare was spun out of McKesson in Q3 to become a publicly traded company.
  • On an LTM basis, Novahill’s Digital Health Public Comparable Index underperformed the S&P 500 Index, declining by 18%
    compared to a 2% gain for the S&P 500 Index.

    • Q3 is the first quarter since 2017 where the NHA’s Digital Health index underperformed the S&P index by a significant margin.
    • Valuation parameters on Digital Health companies such EV to EBITDA and EV to Revenue multiples declined by 22% and
      32% respectively over the last twelve months.