The Health IT market is sending conflicting signals in 2024. While M&A, buyout, and investment activity are surging, underlying valuations have not rebounded to pre-pandemic levels. This juxtaposition of activity and valuations creates a market in flux
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Key Takeaways:
- M&A Valuations: In the first half of 2024, Health IT M&A valuations rebounded from a low of 2.7x to a median of 3.7x revenue. While this is an improvement, it falls short of the pre-pandemic median of 4.6x.
- Market Stratification: High-quality companies command premium valuations, mid-tier firms grapple with valuation mismatches, and distressed companies sell at discounts. HGP estimates roughly 15-20% of US M&A deals traded below invested capital.
- Buyout Surge: Buyout activity is on the rise, fueled by a recovery in the private credit market.
- Investment Trends: Health IT investment (excluding buyouts) is nearing pre-pandemic levels. AI investment soared to over $1 billion in 1H, favoring workflow tools over clinical capabilities by 7:1.
- Influencing Factors: Rebounding hospital margins, pharma tech demand, cybersecurity priorities, and a prolonged regulatory lag shape investment decisions.
