Healthcare touches everyone’s life, but few understand the complexities of the industry. Healthcare is facing significant change, spurred in part by new regulation and reimbursement models. Consolidation and innovation are triggering unprecedented M&A activity. Most of the major advances in healthcare involve innovative technologies, such as Tele-medicine which enables interaction between physician and patient over a secure video link or the broader Tele-health which supports new deployment models for a wide range of healthcare-related services. The Austin Dale Group team has been working with healthcare technology companies for over thirty years. We understand the value drivers, culture and challenges of the industry.

Industry Trends

  • COVID-19 – The immediate impacts of the Coronavirus have increased demand for acute care while depressing demand for non-acute services, as many patients have chosen to avoid in-person elective treatments and preventative care. There are shortages for ER, ICU, and other acute care staffing, while other sectors of healthcare have seen layoffs and facility shutdowns.  The long-term impact of the market disruption in healthcare is not yet clear, through their will undoubtedly be higher utilization of Telemedicine and Telehealth service delivery models.
  • Telemedicine – COVID-19 has greatly accelerated the utilization of telemedicine. Regulators have substantially relaxed credentialing regulations which make it easier for physicians to see patients across state lines and across different care networks.  Payers are encouraging patients to seek out telemedicine to promote timely diagnosis and treatment of conditions that might have otherwise gone untreated without ready access to in-person physician care.
  • Telehealth – The broader spectrum of Telehealth services is also growing in response to the pandemic. From online yoga classes to web-based mental health counseling there is a broad-based shift in delivery models, many of which are likely to continue after the pandemic is resolved.
  • Testing – Clinical laboratories and medical device manufacturers that support in-clinic and distributed, quick-result testing are seeing unprecedented demand. Substantial resources are being deployed in R&D to support this market boom.  This activity will certainly increase investor interest in this market sector.

Market and Valuation Trends

  • Market disruption and revenue pressures for providers – in the short-term there will be market turmoil and uncertainty for traditional healthcare providers. There will likely be downward pressure on some valuations due to this uncertainty. Long-term players may see this as a buying opportunity.
  • Telemedicine – Technology and services which enable telemedicine are seeing high demand and higher valuations. Valuations more than 10x adjusted EBITDA are being realized for technology-based companies that deliver consistently growing recurring revenue.
  • Testing – Testing services and medical equipment manufacturers who support testing are likely to see higher valuations in the near to mid-term due to high demand for services. It remains to be seen whether the pandemic-inspired investment in testing technology will translate into longer-term improvements in testing access and reliable rapid test results.
  • PPE– High demand for Personal Protective Equipment spurred a massive increase in manufacturing capacity.  As the demand stabilizes and eventually decreases, manufacturers may discover excess capacity.  The market will likely contract once a significant portion of the population receives vaccines.  Mid-term valuations may suffer as a result.


What Buyers Want

  • Consolidation/Scale– Bigger is better. Access to new markets and services are desirable for strategic players.  Larger scale also provides greater negotiating leverage with payers and more resources to manage increased regulatory burdens.
  • TeleAnything with Recurring Revenue – Investors will pay high multiples for almost anything that has a high portion of recurring revenue, ‘sticky’ customers, and utilizes a scalable, cloud-based deployment model.
  • Innovation to address changing markets– Novel treatments and new technologies that can help to address the COVID-19 and post-COVID market changes.
  • Bargains– Larger players with strong balance sheets will be looking to acquire at fire-sale prices.