Generally, higher levels of outside investment indicates growing or innovative market segments and higher levels of merger and acquisition activity are generally found in more mature or proven market segments.
In the health IT market, M&A activity has surpassed investment activity among software infrastructure companies, including electronic health record vendors, signaling a more mature market segment, according to a report from Healthcare Growth Partners. As the market has matured, there have been fewer startups and more consolidations as a handful of vendors emerge from the pack and become dominant market players.
Investment activity is outpacing M&A in areas that are growing in importance as the healthcare industry transitions to value-based reimbursement and embraces new models of care delivery, according to the report. In the first half of 2014, 30 companies focused on expanding the care continuum received outside investments, compared with 19 M&A transactions. Even larger discrepancies were seen among patient empowerment solutions vendors (47 companies received investments compared with 17 M&A deals) and personalized medicine companies (14 investments compared with two M&A deals).
As more providers begin to adopt these technologies and the market matures, M&A activity will increase and market leaders will emerge as they did in the software infrastructure market, according to the report.
A recent report from Berkery Noyes suggests this is already happening — across all segments of the health IT market, total transaction volume during the first six months of 2014 is 18 percent higher than the total volume during the last six months of 2013, jumping from 169 deals to 199 deals.
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