CDI Global
Login

Global Healthcare IT market and M&A trends: Status and Outlook

No pulse slowing is to be expected in the healthcare IT sector but rather healthy growth rates fueled by a combination of factors including enhancing patient care while reducing costs and a growing influence of the ubiquitous Artificial Intelligence applications. Let us take a closer look at market trends and how the related M&A activity is also evolving.

1. Healthcare IT Market and Trends, including AI impact  

The global healthcare IT market size was estimated at USD 663.0 billion in 2023 and is expected to expand at a compound annual growth rate (CAGR) of 15.8% from 2024 to 2030, according to Grand View Research. Increasing usage of smartphones, a growing demand for remote patient monitoring for improved out-of-hospital care, technologically advanced healthcare IT infrastructure, and an increase in the number of initiatives and investments supporting eHealth and digital are driving overall market growth.

Global Healthcare IT market size and growth rate, 2024 - 2030

Ease of use, cost-effectiveness, and time efficiency are driving the widespread adoption of healthcare IT in hospitals. The market's expansion is also supported by continuous improvements in services provided by industry players to cater to consumer demands.

North America dominated the market with a revenue share of over 40% in 2023. The region's market growth is fueled by extensive adoption of healthcare IT solutions and services, especially in the USA, as providers strive to enhance patient care while reducing costs. Adoption of healthcare IT solutions varies among providers due to several factors.

The adoption of electronic health records is increasing significantly in the U.S. As per Health IT reports, until 2021, nearly 9 out of 10 U.S.-based physicians had adopted EHR. Thus, high adoption rates also play a crucial role in boosting market growth.

Global Healthcare IT Market share and size, 2023

Asia Pacific is anticipated to hold the highest CAGR of over 22% during the forecast period, with high demand for healthcare IT services, owing to increased government spending on healthcare. Furthermore, demand for healthcare IT systems has been increasing, as it enables efficient management of clinical, financial, and administrative aspects of hospitals.

Several government initiatives and supportive programs are also boosting the adoption of such technologies. For instance, in Australia, state as well as federal governments support healthcare IT at their level. State-level programs, such as HealthSmart, and nationwide programs, such as HealthConnect, are examples of government programs undertaken to increase the integration of IT in healthcare.

Since January 2021, public hospitals in Germany can apply for government funding for projects to boost digital health, cybersecurity, and IT infrastructure. The German federal government will make €3 billion available to the KHZF through the liquidity reserve of the health fund with an additional €1.3 billion to be provided through co-funding by the federal states and hospital operators themselves. At least 15% of the funding requested must be used to improve IT security.

In November 2024, the German parliament has passed a law aiming to reorganize the health sector, slashing the number of hospitals, boosting clinics and “digitalizing bureaucracy”. The two-pronged hospital reform will change the way German hospitals are financed and impose new care standards.

Spotlight on Artificial Intelligence segment: AI adoption supports robust sector revenue projections

AI has increasingly permeated the Healthcare IT sector as participants have leveraged custom algorithms to improve preventative care, risk assessment, patient engagement, and cybersecurity. While AI development in many industries has yet to materialize in revenue gains, early AI adoption in the Healthcare space has accelerated the technology’s financial viability.

Notably, global Healthcare AI market revenue is projected to reach $188.4 billion by 2030 according to Grand View Research.  AI offerings are forecasted to comprise 10.2% of global revenue in the Healthcare IT sector by 2030, up from 2.9% in 2023.

The global AI-in-healthcare market size was estimated at USD 19.27 billion in 2023 and is thus expected to grow at a CAGR of 38.5% from 2024 to 2030. One primary factor driving market growth is the increasing demand in the healthcare sector for enhanced efficiency, accuracy, and better patient outcomes. According to a March 2024 Microsoft-IDC study, 79% of healthcare organizations are presently utilizing AI technology. In addition, the return on investment (ROI) is realized within 14 months, generating USD 3.2 for every USD 1 invested in artificial intelligence (AI). AI technologies hold transformative potential in various areas including medical imaging analysis, predictive analytics, personalized treatment planning, and drug discovery, potentially transforming conventional healthcare practices.

The exponential growth in healthcare data, sourced from electronic health records (EHRs), medical imaging scans, wearable devices, and genomic sequencing, presents significant opportunities for AI-powered solutions to extract actionable insights and support clinical decision-making. The shortage of healthcare workers is also driving the adoption of AI and machine learning (ML) technologies. According to the World Economic Forum estimates from May 2023, there will be a global health worker deficit of 10 million by 2030. Hence, AI algorithms can be trained to analyze patient health data, aiding care providers in rapid diagnosis and treatment planning.

AI and ML algorithms are increasingly being used for rapid and accurate diagnosis, including the detection of COVID-19-positive cases using personalized patient data. For instance, a 2020 NCBI study found that AI-based algorithms accurately detected 68% of COVID-19-positive cases in a dataset of 25 patients initially diagnosed as negative by healthcare professionals. The implementation of AI and ML technologies aims to enhance patient care, reduce machine downtime, and lower care expenses, driving market growth. The pandemic has further accelerated the adoption of AI-based technologies, particularly in diagnostics, patient and medication management, claims processing, workflow optimization, machine integration, and cybersecurity within healthcare settings.

CAD (computer aided diagnosis) systems were once widely used in the US. Thirteen years ago, 74% of mammography screening studies were read with CAD assistance. Those were the first computer-based attempts to detect and highlight visible structures in medical images. Over the last 5 years a new generation of AI emerged. While AI and CAD both aim at assisting radiologists in the analysis and interpretation of medical images, they are not the same. Capable of highlighting small lesions that the human eye might not notice due to fatigue or other reasons, AI helps, when used in mammography, improve breast cancer detection, lower false-positive rate, and can detect cancers earlier. AI provides more reliable results. Moreover, thanks to the diversity of data used to train AI, it can detect rare types of lesions that radiologists with less experience may have never seen before.

2. Healthcare IT M&A market: Health Services Businesses Increasingly Target Healthcare IT Market

M&A activity in the Healthcare IT sector has remained strong, primarily driven by healthcare services businesses targeting IT providers to offset labor shortages. In addition, heightened adoption of artificial intelligence (AI) and machine learning (ML) has provided participants with significant revenue and M&A opportunities, a trend echoed at the 2024 Healthcare Information and Management Systems Society (HIMSS) conference. Several additional takeaways are outlined below:

1. Driven by the need to organize vast amounts of data and improve care quality, AI is projected to comprise an increasing share of global Healthcare IT sector revenue.

2. The Healthcare IT initial public offering (IPO) market has remained relatively quiet, with venture capital and private equity exits favoring M&A.

3. M&A volume in the Healthcare IT space to-date has risen 10.1% year-over-year (YOY), outpacing the broader U.S. M&A market and TMT industry.

4. Middle market (less than $500 million enterprise value) deals in the Healthcare IT sector have continued to comprise the vast majority of M&A transactions to-date.

5. Healthcare IT providers’ ability to showcase sticky customer bases and recurring revenue has spurred elevated private equity acquisitions, exits, and fundraising in the space.

6. Venture capital firms have continuously shied away from early-stage startups

Transaction and Multiples analysis

Our analysis of available worldwide M&A data in the different healthcare IT segments identifies 4 key conclusions:

  1. After a peak in M&A activity in 2020-2021, deal count came back in 2023 to a pre-covid level.
  2. M&A deal count decreased further in 2024: 2156 deals in 11 months vs 2821 deals in 12 months 2023
  3. But Capital Invested is significantly higher in 2024 than in 2023 (+50%), indicating larger deals and a higher appetite for investment from financial investors. Also the Implied EV sum doubled versus 2023 with a similar amount of deals.
  4. Valuations, based on multiples observed on transactions closed decreased in 2024 vs a strong 2023, yet remain at a high level of 20x EBITDA .

Source : Pitchbook, CDI Global analysis , currency USD $, segments : Healthcare software; Healthcare IT; medical software; clinical software; Telehealth; Decision/Risk Analysis; Enterprise Systems ; Medical Records Systems; Outcome Management

Strategic versus Financial buyers:

Strategic buyers have continued to account for the majority (51% of all deals) of YTD 2024 sector deals, albeit by a slim margin. Private strategics have represented 35.7% of deals to-date, often rolling up middle market competitors with advanced capabilities such as AI and  ML  to  boost  technology  stacks.  Public strategic  buyer  activity  has  experienced  the largest  decline  YTD,  falling  31.8%  YOY.  Public market volatility has inhibited many public players’ available   acquisition   capital. Select  public companies in the space have pursued sponsor backing  via  take-private  transactions  to  fund acquisition pursuits. Financial investors became more active ( % deals) in 2024 as well in platform as add on transactions.

About CDI Global advisory in Healthcare & Life Sciences  

CDI Global partners have completed 100+ transactions in recent years in the healthcare & life sciences segment, of which about 10% in the software and IT space, advising as many buyers as many sellers.  Transactions were in the fields of practice management, family doctor and pharmacy management, radiology and cardiology imaging, departmental management, hospital and clinical information systems, EPR, home care and residential management, AIM systems,…

Our Healthcare & Life Sciences expert group gathers several partners with international Healthcare Software & IT domain experience, coming from a corporate or consultancy career or related transaction background.

Leveraging this expertise and combining it with the 50-year experience in mid-market transactions of CDI Global enables us to offer unique advisory and transaction support services to our clients through our offices on all continents.

By Marc De Clerck, Managing Partner CDI Global Belgium

Connect with a CDI Expert. Request a Call Back.

News & Insights

Read more

February 3, 2025

CDI Global Advised Favillini Pharmaceutical Packaging Group S.p.A. (Favillini) in acquisition of Interpack S.p.A

Read more

January 29, 2025

Challenges in Post Merger Integration (PMI): An Operational Perspective in the EU

1
Global Healthcare IT market and M&A trends: Status and Outlook
2
Finding and Closing the Right Cross-Border Acquisitions
3
Where Does Spirit Airlines Go from Here?