HealthTech: 2021 Valuation Multiples

9 March 2021

In the first half of 2020, the trailing 30-month median revenue multiple for HealthTech companies was 3x, the highest in 5 years.

reports : Exit, Investment, Tech and Valuation

HealthTech – the use of technology to deliver or improve clinical health services to patients – was one of the most active and growing industries of 2020.

While the sector was expanding before COVID-19, the pandemic has caused a critical acceleration toward digitalising systems, with HealthTech solutions booming.

Healthcare stakeholders are increasingly joining efforts with HealthTech companies to improve and increase access to remote care.

Restrains on movements forced most businesses to move their day-to-day operations online, including many health clinics and GPs.

Through HealthTech, and the TeleHealth subsector in particular, patients can connect with their doctors and access health care services via videoconferencing and wireless communications from the safety and comfort of their homes.

In turn, doctors can perform electronic consultations as well as monitor their patients remotely for less threatening situations and illnesses. HealthTech has the potential to make healthcare more accessible and convenient far beyond the worldwide pandemic.

Global healthcare funding skyrocketed 45% YOY in 2020, an all-time record. Equity funding was $26.5bn in 2020, the highest ever.

Sectors ranging from telemedicine to medical devices to AI healthcare all raised record-high funding.

2020 proved to be a record year for HealthTech start-ups, with over $10bn in VC funding raised across more than 550 deals. Europe, Asia and North America all saw an increase in YOY funding.

Healthcare Software (relating to hospital management, patient analytics and pharmaceuticals) was the most active sector, accounting for 61% of transactions.

The biggest M&A deal of the year was Teladoc’s merger with Livongo Health for $18.5bn, putting the target company at an astronomical valuation of almost 90x its trailing sales of $207 million.

According to Rock Health, a US-based venture fund dedicated to digital health, the number of HealthTech unicorns is growing, and share prices for digital health companies have broadly increased since the COVID-19 pandemic took hold.

However, HealthTech has yet to see the scale of returns seen in other sectors. For example, in 2019 very few public digital health companies showed positive net income.

HealthTech Valuation Multiples

Hampleton Partners, an M&A advisory firm specialised in technology companies, has recently published their report on the state of HealthTech.

In the first half of 2020, the trailing 30-month median EV/S multiple was 3x down from a 4x peak in the second half of 2019, the highest in 5 years.

Despite previous volatility, EBITDA multiples reached 17.7x in the first half of 2020, the best result since 2015. This growth has been driven particularly by high valuations in the Healthcare Vertical Software segment.

Although HealthTech companies posted their best-ever multiples in 2020, they are still significantly lower than the SaaS industry median.

As a sector, HealthTech is in the relatively early stages, but the post-pandemic landscape will surely provide an opportunity for ambitious company in this space to gain momentum and contribute to the expansion of this industry.