June 2019 M&A activity highlighted continued momentum on several compelling themes:
- Large-Scale M&A: M&A activity within the healthcare sector has been robust; according to a PwC report, healthcare M&A volume increased by 14.4 percent from 2017 to 2018. Vertical integration seems to be a common rationale for many large-scale healthcare M&A deals, as companies are merging with others both up and down the supply chain, including PBMs, providers, and pharmacies. We expect persistence in these patterns throughout 2019 as current industry participants try to remain differentiated and new entrants (e.g., tech giants) look to disrupt the industry.
- Clinical / Patient Data Management: As reimbursement paradigms continue to shift from fee-for-service to value-based care, payers and providers will increasingly need to harness the power of data across multiple touchpoints to deliver the best care to consumers and drive improved efficiencies, all while adhering to regulatory compliance. Clinical and patient data management, interoperability, and security will be essential for a successful transition towards alternative payment and delivery models. Last month, we saw ample activity related to this theme, as both larger and smaller players in healthcare expanded their suite of offerings through M&A.
- Prescription Drug Pricing and Medication Adherence: There has recently been an uptick in legislative activity revolving around drug pricing and coverage, as seen by the U.S. House passing H.R. 987 – which included provisions aimed at improving the accessibility of lower-cost generic medications – and implementing other draft bills to address areas such as reporting requirements for PBMs. Another important area of concern in the pharmaceutical space is medication adherence – an issue that costs the U.S. healthcare system $300B annually. Transparency in drug pricing and medication management are of major importance to all stakeholders, and increased M&A activity in these areas is reflective of this.
Several transactions announced in June align with these themes:
- Dassault Systems, a French 3-D and product lifecycle management specialist, has announced it will acquire Medidata Solutions for $5.8B. Medidata’s cloud-based subscription software services, which help pharmaceutical and biotechnology firms analyze clinical trial data, bolster Dassault’s offerings for life sciences manufacturers and allow it to tap into a fast growing segment of pharma services.
- Anthem, one of the largest health insurers in the U.S., is acquiring Beacon Health Options, the largest independently held behavioral health organization in the country, from Bain Capital and Diamond Castle. The acquisition aligns with Anthem’s strategy to diversify into health services and deliver market-leading integrated solutions and care delivery models that personalize care for people with complex and chronic conditions.
- UnitedHealth Group, the largest health insurer in the United States, has agreed to acquire Equian, a payments processing services provider for healthcare companies and insurers, from New Mountain Capital, for $3.2B. Equian’s platform processes more than $500B in healthcare claims per year and serves nine of the ten largest healthcare payers. Equian will likely merge into UnitedHealth Group’s Optum.
- Ares Management and Leonard Green & Partners have announced that they will acquire Press Ganey, a portfolio company of EQT, for approximately $4.3B. Press Ganey is a provider of safety, quality, patient experience, and workforce engagement solutions for healthcare organizations. The company serves over 41,000 healthcare facilities, which is more than 75% of U.S. acute care hospitals and over 2,500 outpatient facilities.
- Vyne, a market leader in secure health information exchange and electronic healthcare communication management, has been acquired by The Jordan Company, a middle-market-focused private equity firm with original capital commitments in excess of $11B. This new investment supports Vyne’s commitment of providing market-leading healthcare technology and support to thousands of dental practices, hospitals and major health systems across the United States. TripleTree acted as a financial advisor to Vyne.
- Accumen, a tech-enabled provider of health system performance optimization solutions and portfolio company of Arsenal Capital Partners, acquired Halfpenny Technologies (Halfpenny), a Pennsylvania-based clinical data exchange company. Prior to the transaction, Accumen and Halfpenny were business partners for seven years.
- UnitedHealth Group also acquired Boston-based PatientsLikeMe, the world’s largest personalized health network that helps people discover new treatment options and connect with one another. The news comes just months after it became public that the Trump administration was forcing the tech startup into a fire sale over concerns that its largest investor was a Chinese-based company. PatientsLikeMe will be integrated into UnitedHealth Group’s Research & Development arm, which focuses on providing robust solutions to address themes such as cost, quality, and access to healthcare.
- OmniSYS, a technology company that helps pharmacies and pharmaceutical manufacturers drive growth, acquired RX-Net, an automated pricing solution provider for pharmacies. RX-Net’s flagship solution, ProfitMax, provides a fully automated, single interface, multi-location prescription price management solution for retail pharmacies. RX-Net manages an annual prescription volume of over $4B.
- McKesson, a U.S.-based company which distributes pharmaceuticals and provides healthcare IT, medical supplies, and care management tools, has acquired Echo, a U.K.-based medication management company. Through Echo’s app, users in the U.K. receive alerts when their medications are running low and can have repeat prescriptions delivered to their doorsteps. McKesson is the parent company of LloydsPharmacy, a British pharmacy company with more than 1,500 brick-and-mortar locations.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and as always, let us know what you think!