Investment in healthcare IT to grow substantially

Investment in the healthcare IT (HIT) sector is set to grow substantially as IT usage in healthcare becomes critical in producing better health outcomes and delivering substantial cost and efficiency savings, according to the latest research report by Catalyst Corporate Finance.

Investment through mergers and acquisitions (M&A) and private equity (PE) transactions will continue to grow as more acquisitive corporates seek to enter the UK HIT market and PE firms find suitable investment targets.

Much of the predicted growth in the HIT sector is underpinned by Government health strategy, according to the report. "The 2009 budget targeted £5 billion of efficiencies in public sector spending over the next two years. Within the NHS, CEO David Nicholson has taken personal responsibility for QIPP¹ and it has been identified that some of the key areas for savings will be back office operations and IT. This will drive the need for IT in all areas of healthcare and this growth will result in greater investment and a significant increase in M&A activity" concluded Mark Humphries, author of the report and partner at Catalyst Corporate Finance.

Key findings of the report include:

  1. £6 billion has been invested globally in the sector through M&A and private equity over the last three years, much of which has focused on the US market;
  2. Over 40 companies worldwide have been serial buyers of HIT businesses over the past three years, acquiring two or more businesses each year;
  3. Corporate investment activity in the UK and Europe is beginning to follow the US model with recent deals including the sale of CHKS to Capita Plc (£11m) and the acquisition of Liquidlogic by System C Healthcare (£14.2m)
  4. International expansion is a priority for US corporates and the UK market is seen as particularly important one for US acquirors;
  5. UK private equity firms are making HIT a key target sector for investment in recognition of the strong growth and high profitability prospects of many HIT businesses.