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US IT M&A Value Hits $99B; Healthcare M&A Dips As Caution Remains Paramount

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The M&A environment remains particularly dynamic when it comes to the IT sector.

Tech industry cycles move more swiftly than others in many ways, but it takes plenty of time for other industries to adapt to new advances. Consequently, even as consolidation is occurring in certain segments, others are just now looking to buy complementary product lines and expand vendor networks, as the latest RSM US IT Spotlight details.

Businesses are still highly motivated to do so-even as US IT M&A activity dipped in 3Q 2016, value hit a mammoth $99.3 billion. But in such a high-priced environment, many factors remain key for companies to consider, which RSM US industry experts explain.

When it comes to US healthcare, however, the conversation changes considerably. The sector is still adapting to the changes prompted by the Affordable Care Act, but now, in the wake of the recent US presidential election, even those policies may now be in flux. Simultaneously, many service providers must still adapt to current healthcare marketplace economics via consolidation. So, activity is being pushed forward in ways that RSM US industry experts detail.

Q4 2016 Information Technology Industry Spotlight

Broader market conditions continue to encourage mergers and acquisitions (M&A) activity. Lending remains relatively inexpensive; cash reserves or equivalents are still amply stocked, and stock prices remain quite high, so financial means are readily available.

Megadeals, primarily the Dell-EMC merger, resulted in a blockbuster third quarter for information technology (IT) M&A deal value. The motivations for deals like this are varied, but the patterns in which they fall remain the same: Either the interested parties are looking to consolidate in order to shore up core businesses by also taking over complementary product lines and expanding vendor networks, or they are divesting divisions that have been floundering for some time.

Accordingly, looking ahead, more M&A will concentrate within strongly interrelated subsectors.

Key highlights from the third quarter:

  • IT M&A deal value hit $99.3 billion in the third quarter of 2016, outpacing the two prior highest tallies of the past four years. Especially in light of the downturn in completed transaction counts, it’s clear that the massive sum was driven by megadeals, primarily the Dell-EMC merger, which topped out at $60 billion. Backing that one deal out reduces quarterly deal value to $39.3 billion, closer to the historical mean.
  • The median IT transaction size hit $135 million in the most recent complete quarter, far and away the largest tally since the start of 2013.
  • Private equity firms are still looking for investment opportunities wherever they can, and currently, technology presents one of the riper fields of opportunity.


See the full report here.

Q4 2016 Health Care Industry Spotlight

The health care industry remains challenging and dynamic, particularly in the arena of absorbing more and more enrollees. From that development flows the interlocking issues of keeping costs down, adapting to more stringent quality ratings and relating care episodes to patient billings in a more transparent fashion. It is a slow-paced yet unceasing evolution, prompting much consolidation and plenty of divestitures among businesses as they grapple with the entire array of challenges. In many ways, some of those challenges are essentially the same as they’ve always been; in others, they are entirely new phenomena in the realm of U.S. health care.

Mergers and acquisitions (M&A) deal volume in health care declined again in the third quarter—a reflection of the caution that is still apparent, with buyers eyeing reimbursement rate trends and carefully working through due diligence.

Key highlights from the third quarter:

  • With 211 completed transactions, health care M&A deal volume was at the lowest quarterly tally of activity in years.
  • Private equity activity has been slowing within the United States, and health care is no exception. Fresh off of recent highs, the 103 health care transactions closed in the third quarter of 2016 did not represent as much of a plummet as it may seem at first glance, but rather a pause, particularly as deal value remained relatively healthy.
  • Private equity’s portion of overall health care deal flow hit a remarkable 36 percent in the third quarter, the highest measure recorded since the start of 2013. As larger businesses take a breather after significant activity—much as hospitals are experiencing a lull of digestion after several quarters of elevated activity—smaller private equity firms geared toward the middle market are still staying active.

Healthcare M&A

See the full report here.

Article by PitchBook

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