Key Points:
- The telemedicine sector is experiencing a slowdown in mergers and acquisitions (M&As)
- Major players in the US telemedicine sector are categorized into GAMMA tech giants, larger incumbent listed leaders and smaller specialized providers
- M&A trends for telemedicine involve large telemedicine companies aiming to scale geographically and gain market shares by acquiring other countries’ incumbent telemedicine operators
- Despite the slowdown, the US remains the global hub for telemedicine with more than 800 companies, creating opportunities for consolidation
Investment bankers Christophe Morvan and Lawrence Giesen of Drake Star, a tech-focused investment bank, have shared insights on current trends and future predictions for the telemedicine sector moving into 2024. Their analysis reveals that the sector is undergoing a slowdown in M&A activity.
Key players in the U.S. telemedicine sector have been categorized into groups such as GAMMA giants like Google and Apple who are heavily investing in the sector. Other categories include larger incumbent leaders like Amwell and Teladoc Health, and smaller specialized providers such as Capsule and Ro.
Predicted M&A trends for telemedicine involve large telemedicine companies aiming to scale geographically and gain market shares by acquiring other countries’ incumbent telemedicine operators. Morvan states that the current trend reflects that M&A activity is slowing down with only 22 deals completed in H1 2023, a decrease of 35% compared to 2022.
Despite this slowdown, Giesen states that the US remains the global hub for telemedicine with more than 800 companies, offering opportunities for consolidation at attractive multiples.
In terms of fundraising, 82 US deals were recorded in the first half of 2023, a decrease of 45% compared to 2022. Due to economic challenges, investments at mature stages are viewed as safer options. Notable financial backers include venture capital funds like General Catalyst, Alumni Ventures and Optum Ventures.
The experts predict a recovery of the EV/revenue multiple in line with the ongoing bounce-back, expecting telemedicine valuations to stabilize within the 3-times to 4-times EV/revenue range.
