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SVB: Health tech M&A could spike after bubble-burst

Jul 7, 2022
Data: SVB Securities, CapIQ; Chart: Baidi Wang/Axios
Data: SVB Securities, CapIQ; Chart: Baidi Wang/Axios

M&A volume in the technology sector peaked in the 24-month period after the dot-com bubble-burst in 2000, and a recent SVB Securities report suggests this phenomenon "could be mirrored in the health tech space."

Driving the news: Premier Inc. is among the four companies SVB identifies as having the characteristics that indicate it ripe for "strategic alternatives optionality" — validating an Axios report yesterday saying that Premier engaged sell-side banks earlier this year to evaluate options, including a sale.

  • Separately, One Medical is considering its options after fielding takeover interest from CVS Health, Bloomberg reported this week.
  • SVB's three other picks: Talkspace, Allscripts, and Nextgen Healthcare.

Zoom in: SVB screens for four key factors that it suggests would give a company flexibility for strategic alternatives. (In other words, takeout potential.)

  1. Older IPO vintage... because IPO valuation discounts become less relevant.
  2. Data-centric asset
  3. Fewer ownership structure overhangs—founder CEOs, concentrated ownership and PE/VC ownership can either spur or hinder a transaction, it notes.
  4. Approaching valuation trough

Yes, and: Premier fits the first three.

  • The company, which went public in 2013, recently cleaned up its complex corporate ownership structure and its professional services division is home to various data capabilities.

State of play: Health tech's bubble burst is in the early days, and so far, few take-privates of health tech companies have gotten done.

  • The big question everyone is asking, a source who worked on a recent take-private tells Sarah: "How does one put in perspective a premium to the current price, relative to the 52-week-high?"

The bottom line: Public company takeout candidates still need to trade around current valuation levels for a while. Once they stray from those 52-week-highs, we're likely to see more assets in the strike zone for private equity, as boards become more receptive to options.

  • Of course... keep tabs on the big payers, drug-store chains and other strategics as buyers, too.
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