April 26, 2012 – While not always the biggest money makers in the information management market, segments that deal in health care and education data will both continue to see a spike in mergers and acquisitions due to a mix of innovation and regulation, according to new analysis from Berkery Noyes.
In the financial advisory’s first-quarter review of the information and IT marketplace, there were 797 merger and acquisition transactions in the first quarter of 2012, the same number as in the final quarter of 2011. However, the value of deals in the first quarter of 2012 increased by 6 percent over the end of 2011 to $36.3 billion, according to Berkery Noyes. The biggest money deal was Cisco’s nearly $5 billion pitch for multimedia storage provider NDS Group.
And though no deals in the health care or education sectors cracked the top 10 in the report, those markets were the two fastest growing in terms of quantity of mergers and acquisitions, Berkery Noyes reported. This was due to many larger vendors playing “catch up” with innovation and customer regulatory requirements, says Tom O’Connor, managing director of the Berkery Noyes Healthcare Group. The health care and education segments within IT typically “do not innovate well,” mostly because of the non-commercial aspect at the forefront of their day-to-day business says O’Connor.
“Both sectors are 10 to 20 years behind the technology curve and are in major need of unique solutions due to cost pressure in the macro environment,” O’Connor says. “On the plus side, there is a huge amount of innovation by entrepreneurs in both these markets.”
That level of innovation and attention to smaller providers is expected to lead to a “huge” number of deals over the next 18 months in both verticals, as well as market consolidation over the next four years as both shift and update their information delivery methods. Even with that increased volume of deals, most will hit lower than $100 million in their buyout price tag, which is below many notable retail- and financial-specific deals, O’Connor says.
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