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1. Healthtech
2018 Report
Steve Jones & David Levine - Corum Group
www.healthtechexits.com

2. Introduction & Overview
The Continuum of Care
The Healthtech sector is on the top of everyone’s mind. Whether as a patient, hospital system,
outpatient clinic, long-term care provider, or one of the many technology companies providing
solutions to the healthcare sector, the seismic shifts and changes in the industry will have a significant
impact on your future.
The shifts are coming on multiple levels. Regulation always has a hand in driving change, but more
recently, outpacing even governance-driven policy changes has been the attitude towards the patient
relationship. Patient care, in whatever setting, informs the wave of new companies and the types of
companies that are generating M&A activity.
M&A in the Healthtech sector is known to come in waves. In this report, we will look at data from 2015
into the end of 2017 where we identify what may be the beginnings of a new wave of Healthtech M&A.
Before we get into the harder numbers to show the changes in the sector, we highlight two trends:
Vertical segment consolidation and Patient Engagement systems.
The growing awareness and accelerating adoption of new interoperability standards is assuring access
to standardized, structured data that is making a synchronized view of the patient’s entire lifecyle
possible. From the first care providers at birth, to preventive medicine, and through the final stages of
life in palliative care, every interaction with healthcare professionals adds to the history and profile of
a patient’s medical experience. This evolution of a patient’s care and treatment is viewed as the
continuum of care.
Throughout a patient’s lifetime, care plans, treatments, and services will come from a myriad of service
providers. Creating a care plan that transverses this disjointed world of systems, services, and
providers, can only be done with a patient-centric point of view.
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3. Connecting the Continuum
Government Regulations Shaping Care
additional stages of a patient’s experience. For example, post-acute care providers are looking to track
and support a patient as they migrate from an inpatient rehab clinic to a long-term skilled nursing
facility or to a home-health provider. As these market segments continue to migrate towards
interoperability and longitudinal transparency, Healthtech solutions become the centerpiece for tying
together the continuum of care. The recent acquisition of HospiceSoft by Optima Healthcare Solutions,
backed by Alpine Investors Group, reflects this trend. Optima is a leader in solutions for therapy and
home care facilities and saw opportunities in expansion and growth in the next stage of care, hospice
care. This expansion along the continuum of care solidifies their market presence and diversifies their
portfolio.
Healthcare is under constant oversight with government regulations and compliance requirements.
Generally, these stipulations have centered on the liability of intricate care, confidentiality, and
detailed reporting criteria. Adding to these are a new wave of drivers and quality metrics that measure
the patient experience, their participation in their treatment and their readmission rates.
For example, HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) is a new,
industry-wide standard for measuring patient perspectives on healthcare. As a survey designed to
understand a patient’s view of their healthcare, it gives providers a baseline index with which to
measure the effectiveness of their interactions with, and care for, their patients. This information
becomes relevant given the indications that some government reimbursements may be tied to a
provider’s HCAHPS scores or other patient satisfaction rankings.
The R&D teams within these organizations do not have the time to build out the infrastructure
necessary to keep up with the requirements. This drives the demand for Healthtech companies to
accelerate innovation. Those solutions that can capture patient interaction and improve their scores
are part of a growing sector in Healthtech that is driving significate M&A activity.
Patients are more empowered to
participate in their healthcare experience,
which drives a greater investment in
technology to unleash their information
and have it be maintained independently of
the provider or facility.
This trend is eroding resistance to
cloud-based services that provide
seamless access to patient information and
treatment plans across disparate systems
and providers. It is also driving vertical
consolidation, with many providers looking
to expand their solutions to cover
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4. Data-driven Machine Learning and Artificial Intelligence
Know your Expanding Ecosystem
As legacy systems modernize and become more interoperable, unique data relationships and patterns
emerge. Advancements in AI and Machine Learning can turn those patterns and data flow into
automated technological responses that improve efficiency and enhance patient care. Not only are
systems optimized but predictive solutions based on patient behavior can contribute to better
treatment and service.
As new solutions develop and new sub-segments emerge in the marketplace, it is imperative to
understand the vendor ecosystem relative to your own market opportunity and customer profile.
Market shifts drive changes to the ecosystem and can happen rapidly. Create a matrix of solutions,
including those with mandated integration, those adjacent but not integrated, and then those found
within your customer base but non-adjacent. Identifying these vendors, creates a map of companies
with similar designs on your market and reveals patterns and gaps. Those gaps represent market
opportunities that can be leveraged to create a unique position, a unique position that can become
your beachhead of strength. It also helps to create an easy tracking map to track other vendors,
customer trends, and even competition.
Whether now is the time for an exit or years down the road, stay in tune with this index of companies to
give you the constant temperature of the M&A markets and trends. It will quickly become apparent
where the seismic shifts are occuring. Just one M&A deal by a competitor can threaten your entire
landscape and future viability. It can also expose opportunities for growth and expansion that you
could not have anticipated.
A good example of an acquisition that resulted from mapping out the eco-system is the recent purchase
of Infian by QMS. While both company solutions focused on the dialysis market, they were adjacent
and complementary. QMS now expands its footprint within its customer base and captures more wallet
share of their vertical market.
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5. Healthtech Market Analysis
Valuations
While the Healthtech market has seen swings in M&A, the industry continues to enjoyed robust M&A
activity. A review of valuation metrics and M&A over recent years point to strength in both valuations
and number of deals
The following charts highlight Healthtech valuations compared with the same metrics for all vertical
technology companies. Two principal metrics, Enterprise Value as a multiple of Sales (EV/S) and
Enterprise Value as a multiple of EBTIDA (EV/EBITDA) depict important truths about today’s
Healthtech market.
First, the bad news. Sales multiples, both absolutely and in comparison to the broader vertical
technology market, have declined. Following the waves of investment, innovation and consolidation
that followed the implementation of new Federal healthcare laws in the United States, the market has
reached a point of maturity where investors are less inclined to pay a premium for market share,
preferring instead to focus on profitability.
Looking at EBITDA multiples for publicly traded technology companies, that pattern becomes clear,
with Healthtech valuations generally running higher than the market with the exception of occasional
dips—in Q4:2016, Q1:2017 and another in the first half of 2018. However, the recent recovery had
brought EBITDA multiples back in line with the consistent highs of 2017, with multiples greater than
25x, the maturing market valuing profitable business models highly.
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6. Shifting from the value of Healthtech companies as described by the public markets to the value of
those firms in actual transactions, the chart below plots Enterprise Value on the Y-axis versus annual
revenues on the X-axis (note that the scale is logarithmic, to capture the view of larger as well as smaller
deals. Deals above the line indicate higher-than-median EV/S deals. Note the cluster of acquisitions of
companies with revenues between $10M and $30M, indicating the point at which value begins to
solidify. At this level, the companies have achieved product-market-fit and the experiment is over; the
opportunity for higher growth is a function of capacity and distribution scale. Both are attractive
drivers for acquisitive buyers.
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7. Top Healthtech Acquirers
As described above, CEOs and owners of Healthtech companies considering M&A should consider
who within their ecosystem is a prospective acquirer while realizing that trends like the continuum of
care and interoperability make this list much longer than it has ever been. In addition, the financial
landscape is changing as well. Notably, many of the the top buyers of Healthtech companies in recent
years have been private equity firms, growing companies within their portfolio by rolling up or
tucking in complimentary acquisitions.
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H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017

8. Deal Size
Conclusion
Another key trend over the same rame is the evolving size of the average deal. In 2015, there
were fewer deals with disclosed tr values overall, and a majority of deals had of
$20M and less. There was a similar trend in 2016 with a larger volume of disclosed deals overall.
However, the deals in 2017 are edging into the higher value range and there has been a steady
absolute rise in deals between $250M to $1B.
Technological, social and regulatory trends are driving significant change in the healthcare
ecosystem, with a strong M&A market, too. Increased systemic focus on the of care and
governmental influence that puts the at the center of their own care create both demand and
urgency for v and market expansion. This is a for healthtech company
owners, investors and ex ves to pay careful to M&A trends, investment y, and
r.
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9. About the Authors
Steve Jones and David Levine are both Senior Vice Presidents and dealmakers with
Corum Group, the leading seller of technology companies globally. Both bring over 25
years of high-tech executive and entrepreneurial experience to their roles, with
extensive experience starting, operating, growing, buying and selling technology
companies. Dave has long experience in the life sciences and biomedical industry, and
serves on the board of Breathtec Biomedical. Steve Jones recently led the sale of
Hospicesoft to Optima Healthcare Solutions. Other recent Corum deals in the
healthtech space include the sales of CodeMetro, Infian and Netgain. For details on
these transactions and others, please visit www.corumgroup.com.