Greenberg Advisors, a revenue cycle management-focused investment bank, has published its 2016 merger and acquisition update analyzing deal activity in the RCM and accounts receivable management markets.
Here are 15 takeaways.
RCM market
1. Last year, the RCM market saw $15.7 billion trading hands across 93 transactions, according to Greenberg Advisors. The investment bank said sellers included service and IT companies throughout the revenue cycle.
2. RCM deal activity increased 47 percent in 2016 over the year prior, while deal value increased by 314 percent over the same period, according to Greenberg Advisors.
3. The investment bank cites multiple "blockbuster" deals from 2016, including Pamplona Capital's purchase of MedAssets for $2.75 billion and IBM Watson's $2.6 billion purchase of Truven Health Analytics.
4. More than half (54 percent) of sellers last year sold to financial sponsors compared to only 25 percent in 2015, according to Greenberg Advisors.
5. Private equity or private equity-backed companies also accounted for more transactions last year than in 2015 (69 percent compared to 60 percent), the investment bank said.
6. Greenberg Advisors said the consolidation among vendors, along with the overall growth of RCM firms, has attracted private equity companies for both platform investments and add-on acquisitions "to create a more dynamic offering or to expand into new service lines or geographic areas."
7. The majority of deal activity in 2016 was in the lower middle-market with 66 percent of deals trading at $25 million or below, consistent with activity in the year prior, according to Greenberg Advisors. "Potential sellers often wonder if their business is 'saleable' with annual revenue below $10 million, GA's data clearly indicates that the answer is an overwhelming 'yes,' as almost half of sellers in 2016 had revenue below $10 million," the investment bank added. "However, 2016 could also be categorized as the year of the 'mega-deals' with multiple billion dollar deals closing. Therefore, while the percentage of transactions that traded for $100 million or greater was fairly stable from 2015 (14 percent in 2015 vs. 15 percent in 2016), the median transaction value of these deals was substantially higher in 2016."
8. Last year, buyers aggressively targeted RCM companies either offering software service-based solutions or tech-enabled services, according to Greenberg Advisors.
9. Greenberg Advisors expects RCM deal activity in 2017 to meet or exceed that of 2016.
ARM market
10. In 2016, 28 deals representing more than $3.7 billion closed, according to Greenberg Advisors. That's an 8 percent increase from the year prior.
11. The investment bank said the median deal value increased nearly 100 percent last year "as consolidation continues to occur within the debt collection industry, resulting in much larger companies."
12. A majority of deals (57 percent) closed in 2016 were under $25 million in value, however, 29 percent of the transactions were completed for more than $100 million, according to Greenberg Advisors. The investment bank said this shows diverse interest in both the lower-end of the market and the upper-end of the market.
13. ARM firms operating within the education sector accounted for 21 percent of the transactions in 2016, according to Greenberg Advisors.
14. Still, the financial and healthcare markets were two of the more active sectors last year, with 54 percent and 46 percent of sellers operating in these markets, the investment bank said. Greenberg Advisors attributed this to "consolidation amongst creditors and providers as well as increased regulatory oversight."
15. Greenberg Advisors expects "ample" ARM deal opportunities in 2017 for those that have invested heavily in compliance.
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