Health IT market on track for heavy consolidation

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The healthcare IT merger and acquisition space will go through heavy consolidation over the next five years, according to Tom O'Connor, managing director at New York-based Berkery Noyes. In a recent interview with Healthcare Informatics, O'Connor, touting a recently released whitepaper by the investment bank, said that there simply are too many players in the industry, despite the need for constant innovation.

"Everyone's under a lot of financial pressure in healthcare to do more with less," O'Connor told Healthcare Informatics. "There will be bigger vendors, but they'll be doing more."

According to O'Connor, healthcare, along with education, are more than a decade behind other industries in going digital. Still, he said, the health IT industry a "mixed picture" in which more vendors are fighting for bigger shares of a limited hospital market.

"And hospitals want fewer vendors, to make them more efficient … 10 years from now, you'll see a lot fewer companies," he said.

According to a Berkery Noyes report published in January, mergers and acquisitions in health IT increased considerably from 2011 to 2012, with smaller deals yielding big returns on investment. The report, which analyzed M&A activity in 2012--comparing the data since 2010--showed that healthcare IT M&A transaction volume increased 21 percent annually, with private equity firms accounting for four of the industry's top-value deals last year.

Mercom Capital Group reported in April that health IT companies raised a record $493 million in venture capital during the first quarter of 2013, with 104 deals completed.

To learn more:
- read the Healthcare Informatics interview

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