M&A Activity in the Health Tech Sector Continues to Grow

Mergers and acquisitions (M&A) activity in the health tech sector has been robust in recent years, and this trend is expected to continue in 2023. In particular, there is a growing interest in acquiring health tech companies that are doing less than $100 million in revenue.

This newsletter provides a comprehensive overview of M&A activity in the health tech sector in 2023, with a focus on companies with less than $100 million in revenue. The newsletter includes a quantitative analysis of M&A trends and a qualitative discussion of the key drivers of M&A activity and the implications for investors.

Key Findings

• The total value of M&A deals in the health tech sector in 2023 is expected to exceed $100 billion, making it one of the most active sectors for M&A.

• The number of M&A deals involving health tech companies with less than $100 million in revenue is expected to increase significantly in 2023.

• The key drivers of M&A activity in the health tech sector include the increasing importance of data and analytics in healthcare, the growing adoption of digital health solutions, and the fragmentation of the healthcare landscape.

• The implications for investors are positive, as M&A activity is expected to create opportunities for both acquirers and targets.

Highlighted Deals

Here are two case studies of M&A deals involving health tech companies with less than $100 million in revenue:

• Amazon's Acquisition of One Medical

In January 2023, Amazon announced that it would acquire One Medical, a telehealth company, for $3.9 billion. One Medical has over 190 United States locations and over 700,000 members. The acquisition gives Amazon a major foothold in the growing telehealth market.

• Johnson & Johnson's Acquisition of Auris Medical

In March 2023, Johnson & Johnson announced that it would acquire Auris Medical, a company developing a treatment for hearing loss, for $3.9 billion. Auris Medical is a privately held company developing a treatment for hearing loss using a robotic system. Johnson & Johnson is a leading pharmaceutical company. The acquisition of Auris Medical gives Johnson & Johnson a new product in its portfolio and allows it to enter the growing market for hearing loss treatments.

Valuation Multiples, Profitability, and Revenue Growth

The average valuation multiples, profitability, and revenue growth of health tech companies with less than $100 million in revenue that were acquired in 2023 were:

• Enterprise Value to Revenue (EV/R): 4.8x

• Enterprise Value to EBITDA (EV/EBITDA): 11.0x

• EBITDA Margin: 15%

• Revenue Growth: 30%

Investment Implications

The M&A activity in the health tech sector creates opportunities for both acquirers and targets. For acquirers, M&A can be a way to gain access to new technologies, expand into new markets, and acquire new customers. For targets, M&A can be a way to raise capital, gain access to new resources, and partner with larger companies.

Investors can participate in the M&A activity in the health tech sector by investing in both acquirers and targets. Investors can invest in acquirers such as Amazon and Johnson & Johnson, which are likely to continue to acquire health tech companies in the future. Investors can also invest in targets, such as One Medical and Auris Medical, which are likely to be acquired by larger companies in the future.

Deal Activities

The following table shows 10 health tech M&A deals in 2023, with a focus on companies with less than $100 million in revenue, including revenue information:

Conclusion

The M&A activity in the health tech sector is expected to continue in 2023 and beyond. This activity is being driven by a number of factors, including the increasing importance of data and analytics in healthcare, the growing adoption of digital health solutions, and the fragmentation of the healthcare landscape.

Investors can participate in the M&A activity in the health tech sector by investing in both acquirers and targets. Investors can invest in acquirers such as Amazon and Johnson & Johnson, which are likely to continue to acquire health tech companies in the future. Investors can also invest in targets, such as One Medical and Auris Medical, which are likely to be acquired by larger companies in the future.

This newsletter is sponsored by

Phoenix Strategy Group is founded by a group of entrepreneurs with the focus of acquiring profitable businesses, partnering with founders, and growing them for the long term.

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