The global market for Healthcare IT software has seen a strong rise in M&A activity and startup funding over recent years. Average multiples of around 25x EBITDA, paid in the framework of Healthcare IT acquisitions, reveal the attractiveness for investors. In the field of health digitization, Germany seems to be lagging behind and has a mostly unconsolidated market structure with few large players and a wide field of small but highly specialized providers. The digital transformation of healthcare will push software developers – small and large – into seeking partnerships and cooperation. Thus, the German market is expected to enter into a far-reaching consolidation process which would bring both opportunities and risks for software companies.
▪A high degree of fragmentation and specialization: small developers lack the efficiency and overall ability to serve the growing demands of their growing customers. On the other hand, large providers often lack the specific know-how they need to stay competitive.
▪Strong innovation pressure: software providers will undergo an extensive modernization process investing into the development of new products and technology to keep up with an increasingly demanding market. Small providers might be unable to meet this challenge alone.
▪Cost pressure: healthcare providers have to cope with constant cost pressure, which they pass on to their software suppliers. Thus, efficiency and synergy will be key to survival for such supplier to an extent never before felt on the market.
▪Healthcare consolidation: the consolidation in the healthcare sector leads to large cross-sector providers that require much more complex solutions and services. Software suppliers have to adapt to these rapidly changing demands.
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“The competitive landscape is shifting quickly for Healthcare IT providers as customers become more demanding and value conscious. Operators need to respond to these developments as in many cases, old business models no longer work. PE is targeting proven concepts with growth potential, which is giving the M&A market and valuations a major boost.”