HGP Health IT January 2020 Insights

February 06, 2020

Ten years into the bull market, we operate in a heightened state of awareness for any indication of market weakness that may signal a downturn.  While debt levels are rising and GDP growth somewhat sluggish, the world of private equity, public equity, and M&A continues to be in full swing bull market mode.

Our thesis at HGP is that nearly all asset classes during this bull market can trace their success to a single source: low interest rates. Low interest rates increase the money supply, increase the availability of debt, reduce returns expectations, and, as a result of all these things, cause valuations to rise.  There arguably has not been a better time in modern history to ride the wave of rising valuations than the last 10-years.

Based on Health IT transaction trends, the market continues to show strength.  Sentiment is also strong, as HGP is aware of a rich cross-section of interested acquirors and investors – the appetite for investment and acquisitions feels as high as ever.  However, while many sellers continue to have aggressive valuation expectations and are willing to wait for the right price, we have been exposed to an increasing share of sellers who feel a sense of urgency to make a transaction before the market cracks.  As we head into the election cycle, HGP will closely monitor market data and sentiment for cyclical change and will keep our readers updated as we progress through the year.


Noteworthy Transactions

Noteworthy M&A transactions during the month include:

  • Snapworx, software company providing patient contact management and workflow optimization for the CPAP resupply market, reached a definitve agreement to be acquired by ResMed. ResMed plans to combine the entity with subsidiary BrightTree.
  • Molina Healthcare agreed to acquire NextLevel Health Partners, a Medicaid managed care organization for approximately $50 million. Molina will assume the right to serve approximately 50,000 Medicaid and Managed Long-Term Services and Supports (MLTSS) members in Illinois’ Cook County.
  • Healthgrades acquired Evariant, healthcare consumer and physician engagement company, creating a combined entity that will offer a comprehensive end-to-end engagement platform.
  • Medical Mutual signed an agreement to acquire Bravo, a data-driven provider of wellness solutions to more than one million users nationwide. The acquisition bolsters Medical Mutual's wellness offering.
  • Valify, a technology company focused on helping clients reduce the overall cost of healthcare services, was acquired by HCA Healthcare. HCA will leverage the platform to identify and pursue opportunities to decrease the overall cost to provide healthcare services.
  • SCI Solutions acquired patient data collection and payments platform Tonic Health to meaningfully engage consumers at every step in their digital healthcare journey.
  • After the Tonic Health announcement, R1 RCM announced their acquisition of SCI Solutions for $190mm. This acquisition creates a complete solution that enables healthcare providers to automate ordering, scheduling and authorization processes.
  • InTouch Health, developer of virtual care platform, reached an agreement to be acquired by Teladoc for $600mm at a 7.5x revenue multiple. The acquisition positions Teladoc as a single solution for their entire virtual care strategy.
  • Infor agreed to acquire RTLS provider Intelligent Insites. The acquisition support's Infor's focus on IoT and clinically-connected capabilities for healthcare.
  • NantHealth announced the divestiture of their Connected Care Business to Masimo for $47.25mm. NantHealth’s Connected Care solutions provide medical device interoperability to hospitals and health systems.
  • Clarivate Analytics agreed to acquire Decision Resources Group, provider of high-value data, analytics and insights products and services to the healthcare industry. The $950mm deal values DRG at approximately 12x EBITDA and positions Clarivate to expand their life sciences services and solutions portfolio. 
  • VisionTree, developer of cloud-based, patient-centric data collection and health management solutions, was acquired by Brainlab. The acquisition re-emphasizes the Brainlab commitment to quantifying medical procedure outcomes by taking a closer look at patients’ quality of life and condition after treatment.
  • Imprivata acquired GroundControl, leader in cloud-based automation software for provisioning shared mobile devices. The combination will advance the proliferation of Digital Identity Authorization and Access Management solutions and services for mobile devices in healthcare.
  • AMN Healthcare agreed to acquire Stratus Video, provider of video remote language interpretation services, for $475mm at a 4x revenue multiple.

Noteworthy buyout transactions during the month include:

IPOs during the month include:

  • Primary-care company One Medical had a successful first day trading on the NASDAQ. The company priced its shares at $14 apiece and closed 58% higher for the day at $22.07 a share, valuing the company at approximately $2.7 billion.
  • Schrodinger, predictive molecule-discovery software platform maker for biopharmaceuticals, plans to raise $150 million in an IPO of 10 million shares priced at a range between $14 to $16.


Noteworthy News Headlines


Public Company Performance

HGP tracks stock indices for publicly traded health IT companies within four different sectors - Health IT, Payers, Healthcare Services, and Health IT & Payer Services. The chart below summarizes the performance of these sectors compared to the S&P 500 for the month of January:

The following tables include summary statistics on the four sectors tracked by HGP as well as the S&P 500 and NASDAQ for January 2020: