While the overall pace of media deals slowed considerably last year because of the credit crunch, the health care information and technology sector continued to chug along.
M&A activity in the sector had a combined value of $7.3 billion, an 83% increase from 2007, according to a recent report by media investment bank Jordan, Edmiston Group. There were 122 M&A deals completed in the sector in 2008, up 21% from the previous year.
By contrast, the total number of transactions in media and information sectors fell 13% last year, declining to 758 deals from 872 in 2007, according to Jordan, Edmiston. Deal value plunged 68% to $33.3 billion, from $104.4 billion in 2007.
Even though health care M&A activity slowed last quarter due to the tightness of the credit markets, the sector should grow again this year due to U.S. demographic trends—particularly the increasingly aging population—plus the Obama administration's pledging of billions of dollars to expand health care and improve medical information technology, said Elizabeth Satin, managing director of Jordan, Edmiston.
“We see a lot of potential in the space,” Satin said. “A lot of these businesses are data- and subscription-oriented, and that's what media information companies in health care like: a long-term contract with regular payments over an extended period” and reduced exposure to advertising cycles.
Several of the most noteworthy health care deals in 2008 were for media properties that focus on medical data management and analytics, such as Wolters Kluwer's acquisition of UpToDate, an evidence-based data provider. Financial terms of the deal were not disclosed.
The acquisition fits squarely with the company's strategy of expanding in “high-growth markets, particularly the fast-growing point-of-care and electronic medical records markets,” said Robert Dekker, director of communications at Wolters Kluwer Health. Jordan, Edmiston expects Wolters Klu-wer to make a number of strategic moves to strengthen its health care portfolio going forward.
The growing need throughout corporate America to cut medical costs and promote more effective disease management is another factor that favors health care M&A activity for the long term. In January 2008, for example, Elsevier acquired MEDai, a predictive analytics company that works to improve the delivery of health care.
While electronic media properties targeting the health care field are increasingly attractive, print publications in the same area remain vulnerable. Ad pages for the health care category fell 39.6% in January, according to PERQ/HCI. Ad revenue dropped 11.4%.