The Healthcare IT sector had $211 million in venture capital (VC) funding in 2010 in 22 deals. Sixty-two different investors participated in these funding rounds. $629 million was raised by Healthcare IT companies outside of VC funding, through various forms of debt and credit facilities, which is a positive sign for the sector. Significant VC transactions included a $60 million Series C raise by Castlight Health, a $30 million raise by PatientSafe Solutions and a $20 million Series D raise by Phreesia. The top five investors in the sector for 2010 included VantagePoint Venture Partners, Long River Ventures, Morgenthaler Ventures, OpenView Venture Partners and Osage Partners.
M&A activity was robust in the Healthcare IT sector totaling almost $4 billion in 85 different deals. Only 21 deals were disclosed, indicating a much larger M&A activity number. Notable transactions included the $1.3 billion merger of Allscripts and Eclipsys, the acquisition of Phase Forward by Oracle for $685 million and the acquisition of Medicity by Aetna for $500 million. “Consolidation and strategic acquisitions among Healthcare IT companies helped fuel this surge in M&A activity,” commented Raj Prabhu, Managing Partner at Mercom Capital Group.
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Healthcare IT – Fourth Quarter
VC funding activity decreased in Q4 coming in at $11 million in five transactions out of which three were disclosed, compared to $62 million for seven transactions during Q3. Notable VC transactions included a Series A raise of $7.5 million by DICOM Grid and a $2.6 million raise by Halfpenny Technologies. Debt and other funding activity amounted to $567 million in two disclosed transactions, Agfa’s $130 million loan by the European Investment Bank and the $394 million loan provided to CompuGroup Medical underwritten by SEB.
M&A activity for the sector saw a surge in the number of deals compared to Q3. Out of 30 M&A transactions, seven were disclosed for a total of $860 million compared to the third quarter that had a total of 19 deals of which three were disclosed for $326 million. The $500 million acquisition of Medicity by Aetna and the $250 million acquisition of PHNS by The ConJoin Group were the notable transactions that took place in Q4.
Mr. Prabhu continued, “Healthcare IT funding steadily dropped in Q4, while the number of M&A transactions almost doubled, indicating that we might be seeing some consolidation in the industry.”
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