July 9, 2012
The medical transcription and speech recognition market just got even more interesting. Following on the heels of Nuance Communications’ acquisition of Transcend Services for $302 million in March at a 2.5x revenue multiple, One Equity Partners (the private equity arm of JPMorgan Chase with $11 billion under management) last week announced plans to acquire M*Modal, Nuance / Transcend’s leading competitor in clinical transcription services and speech recognition solutions. One Equity is paying $1.1 billion for M*Modal, or $14.00 per share, an 8.3% premium over the closing price prior to the deal’s announcement. This valuation represents approximately 2.5x M*Modal’s trailing revenue.
Having recently released its next generation of healthcare speech recognition solutions, M*Modal will be able to advance its leadership position in the transcription industry even faster with One Equity’s sponsorship. In particular, we believe that M*Modal is likely to consider acquiring one or more transcription services vendors, in the same manner that Nuance acquired Transcend. Transcription services vendors enable speech recognition providers with a means to better disseminate their technology solutions and develop closer, continuing client relationships. In addition, One Equity Partners has a history of growing its portfolio companies through acquisitions, and has a demonstrated understanding of the healthcare landscape through its other investments in Wright Medical Group and Apollo Health Street.
Bottom line: One Equity Partners’ acquisition of M*Modal reaffirms Signal Hill’s outlook that consolidation is in the near-term forecast for transcription service vendors.
April 25, 2012
Signal Hill is pleased to announce it has published its Q1 2012 M&A Reviews for the following sectors:
A list of all published Signal Hill M&A Sector Insights are available here.
March 26, 2012
A WSJ Deal Journal article recently noted that buyouts by PE firms have dipped so far in 2012 they are on pace to make up barely 40% of the deal values witnessed in 2011 and 2010. For the information technology sector, however, Signal Hill’s data shows that private equity buyers have contributed the highest total enterprise value for a Q1 period since before the recession. And that’s with one week of the quarter left to go.
Year-to-date in 2012, PE buyers closed 15 transactions – flat compared to 2011 and well above the seven deals announced in Q1 2009. These 15 most recent transactions account for nearly $4.4 billion in enterprise value, the highest level since 2007. A handful of large deals this year account for the increase, such as CPA Global’s $1.4 billion acquisition by Cinven; Transunion’s $1 billion acquisition by Advent International and GS Capital Partners; as well as Quest Software’s $1.9 billion acquisition by Insight Venture Partners earlier this month. These stats do not include add-on acquisitions by PE-owned companies, a sector of the market which remains highly active.
The Deal Journal article notes that the slowdown in overall buyouts is a surprise because “private-equity investors have a multitude of reasons to whip out their checkbooks for new purchases.” That is indeed the case within the IT sector. With public equity markets on a tear (the NASDAQ Composite is up over 19% already for the year), PE firms have been more willing to spend heartily to acquire healthy, growing companies. We recently wrote about Quest Software’s acquisition, where Insight offered a 14.4% premium over the 30-day trading price and, according to recent SEC filings, a valuation of 2.2x trailing revenues and 13.1x EBITDA. Cinven noted that its acquisition of CPA Global (a global provider of intellectual property (IP) management services and software) was driven by defensive qualities and attractive growth prospects, not to mention exceptional financial performance and cash flow.
As Q1 winds to a close and the overall markets continue to rebound, we expect to see financial buyers plow even more money into the IT sector. As the Deal Journal says, there usually is a lagging correlation between firming financial markets and Monday morning deal announcements.
IT Transactions with PE Buyers, 2007-2012
*Q1 2012 as of March 23.
March 8, 2012
Nuance Communications, a developer of imaging and speech recognition technologies, announced this week the acquisition of Transcend Services, a provider of medical transcription and voice editing services. The move comes as healthcare providers continue to demand increasingly automated transcription services. Nuance is paying $302 million enterprise value for Transcend, or $29.50 per share, a 20.4% premium over the 30-day trading price. This valuation represents approximately 2.4x Transcend’s trailing revenue.
Transcend’s services will expand Nuance’s customer base in the healthcare and hospital market. The company’s technology translates physicians’ voice recordings into electronic medical records, and also provides outsourced transcription and editing services on the customer’s platform. This is not Nuance’s first foray into the healthcare transcription market; it acquired Transcend competitor Webmedx last July for an undisclosed amount. The same week, rival medical transcription company MedQuist acquired M*Modal for $130 million (5.4x revenue).
The Nuance announcement builds on the fast start to Healthcare IT so far in 2012. Since January 1, there have been 41 announced HCIT transactions tracked by Signal Hill – more than double the comparable period in 2011 (see chart below). While Nuance is a public company, private equity-backed buyers have accounted for more than 30% of all acquirers. Other significant HCIT transactions so far this year include: APS Healthcare’s acquisition by Universal America for $277 million; Simcyp’s acquisition by Vector Capital-backed Certara for $32 million; and Velquest Corporation’s acquisition by Accelrys for $35 million. We expect this deal flow to continue through the rest of the year, barring significant macroeconomic events. Keep an eye out for next month’s Q1 2012 review for a deeper look at M&A in the HCIT sector.
HCIT Transactions Announced YTD March 7, 2008-2012
February 21, 2012
Signal Hill is has published Q4 2011 M&A Reviews for the following sectors:
Click the links above to access a PDF of the Q4 2011 M&A Review for each sector or view them all in PDF form here. A list of all published Signal Hill M&A Sector Insights are available here.
November 8, 2011
Healthcare cost containment solutions provider HMS Holdings agreed this week to acquire privately-held HealthDataInsights, Inc. (HDI), a technology-enabled healthcare services company that ensures claims integrity and recoups improper payments for health plans and government payers. The HMS/HDI combination is expected to create the nation’s premier provider of improper payment identification services for Federal, State, and commercial health benefit programs.
HDI reviewed more than $300 billion in paid claims last year and is the exclusive Medicare Recovery Audit Contractor (RAC) in 17 states and three U.S. territories, covering approximately 22% of all Medicare claims in the nation. HDI will accelerate HMS’s multi-year strategy of investing in new but related products and markets, and will also provide HMS with expertise in its state Medicaid RAC business. The acquisition extends HMS’ reach into the commercial health plan market and expands its service offerings to existing Medicaid managed care plan clients.
HDI is projected to contribute approximately $85 million of revenue to HMS in 2012. HMS is paying approximately $400 million for HDI, valuing the company at around 4.7x forward revenue, well above the 2.5x median revenue multiple for the HCIT sector for 2011 through the third quarter. The acquisition also provides a healthy exit for HDI’s investors GRP Partners, Redhills Ventures and Ticonderoga Capital, which invested nearly $24 million since 2004.
HMS’ purchase of HDI is the latest in a steady flow of acquisitions of claims integrity and analysis businesses. In February, SCIOinspire acquired National Audit, a healthcare claims audit and payment integrity services provider; in 2010 Thomson Reuters acquired Healthcare Data Management, a company that analyzes claims and accountability for self-insured health benefit plans; and in 2009 Ingenix acquired AIM Healthcare Services, which provides claims management services for government and commercial healthcare payers.
Fraud, waste and abuse losses account for approximately $200 billion, or nearly 8%, of all U.S. healthcare expenditures. As more money continues to flow into the HCIT space, we expect to see increasing interest in areas such as claims integrity.
October 26, 2011
Signal Hill is pleased to announce it has published its Sector M&A Update: Healthcare IT 2011.
To access a PDF of the report, please click here. A list of all Signal Hill published M&A Sector Insights are available here.
August 25, 2011
Four IT companies announced filed for IPOs over the past two days, despite continuing turmoil in the public equity markets. Jive Software, a social networking tool for businesses, filed for a $100 million initial public offering, as did Eloqua, a provider of revenue performance management software. Angie’s List, a website which offers consumers a way to review and rate doctors, contractors and service companies, filed to raise $75 million, while Brightcove, an online video publisher, filed to raise $50 million. [Update: SaaS customer reviews platform provider Bazaarvoice has also filed for an $86 million IPO.]
An open and active IPO market is clearly good for M&A. Higher public market valuations generally mean bullish buyers, which will value acquisition targets with the same enthusiasm. This also creates opportunities for a company which has filed to be picked off by a strategic buyer. There have been five such IT companies acquired already this year, the most prominent of which was the $8.5 billion acquisition of communications provider Skype by Microsoft in May.
Recent Acquisitions of Companies in Registration
(click image to enlarge)
Companies filing for IPO are also making significant plays as buyers. Of the IT companies that filed in 2010, 12 have made at least one acquisition since filing – accounting for 19 acquisitions already in 2011. While some of these companies have gone public since then, others are either still holding off, or decided to withdraw. These include the high-profile social companies such as Zynga and Groupon more recently, but also content company Demand Media, mobile health software provider Epocrates, and marketing firm Affinion Group.
The equity markets are still down significantly year-to-date, but August is witnessing its most active M&A month ever. This week’s aggressive IPO filings are a good sign that confidence remains. The more liquidity available for these companies, the better the M&A landscape will be moving forwards.
August 24, 2011
Whoever says no one does any business in August is living in the past. With a week to go before the end of the month, deal volume for August 2011 is at its highest point ever, with 120 transactions totaling more than $28 billion in enterprise value. In fact, data from Signal Hill shows a pretty consistent climb in the number of deals being announced in August over the past decade
The two multi-billion dollar transactions announced last week helped boost August’s totals: HP’s acquisition of Autonomy for $10.9 billion and Google’s acquisition of Motorola Mobility for $9.3 billion represent 72% of the month’s total enterprise value. However, there were a number of other sizable acquisitions announced that added to the record numbers: Emdeon’s purchase by the Blackstone Group ($3 billion); SunGard Higher Education’s acquisition by Datatel ($1.2 billion); Vangent’s acquisition by General Dynamics ($960 million); and Network Solution’s acquisition by Web.com ($824 million).
Two of the largest acquisitions in 2010 also occurred in August (McAfee/Intel, $6.8 billion; RBS WorldPay/Advent Capital & Bain, $3.2 billion), not to mention, revenue multiples have grown substantially over the past two years, climbing to 2.1x (2010) and 2.6x (2011) during the month of August, from 1.1x in 2009. Signal Hill announced two of its own deals this August as well. The dog days of summer might now have to be called the “deal days” of summer if this trend keeps up.
August Deal Volume, 2002-2011*
August 9, 2011
Two massive Healthcare IT deals were announced recently, a sign that the Healthcare market is finally starting to grow as anticipated. On the heels of ExpressScripts’ announced $29 billion acquisition of Medco, a prescription management provider, the Blackstone Group made headlines with rumors, and finally an announcement, that it agreed to acquire Emdeon, a medical data services provider, for approximately $3 billion.
These two latest marquee deals reflect federal rule changes that are finally driving buyers and investors into the market. There has been significant activity specifically around companies specializing in patient information and payments/revenue cycle management. Earlier this year, Practice Fusion, a web-based electronic health record company, raised $23 million from investors led by the Founders Fund, while JMI Equity took a minority investment in PointClickCare, an electronic health record platform for the long-term care industry. ADP, a payroll and HR services and solutions company, acquired AdvancedMD, a provider of cloud-based solutions for practice management, electronic health records, and revenue cycle management, from private equity firm Francisco Partners.
Other recent HCIT transactions over the past month included Nuance Communications acquisition of Webmedx, a clinical documentation intelligence company. Azumio, a developer of biofeedback apps for smartphones, also made waves late last month when it announced it raised $2.5 million from Founders Fund, Accel Partners and Felicis Ventures.
The HCIT sector is poised for more activity and growth with HCIT spending expected to reach $40 billion this year, with a CAGR of 24%. With Blackstone’s bid for Emdeon, and the ExpressScripts/Medco deal, these two transactions could mark the beginning of the long-awaited golden era for Healthcare IT.