At $1.2 billion, Inovalon Holdings Inc.'s deal to acquire ABILITY Network Inc. would be the 10th-largest transaction in the U.S. healthcare technology space announced since 2014, according to an S&P Global Market Intelligence analysis.
Billion-dollar deals in healthcare tech have picked up speed in the past two years. Of the top 10 deals on the table, all except two have occurred since 2016. The largest since 2014, Quintiles Transnational Holdings' 2016 acquisition of IMS Health Holdings, had a deal value of $10.32 billion upon completion. The merged company was renamed IQVIA Holdings Inc.
Inovalon expects that the tie-up with healthcare technology peer ABILITY will significantly diversify its mix of clients and make its revenues less dependent on its largest customers.
About 15% of Inovalon's client base consists of providers, whereas 91% of ABILITY's base is made up of providers, according to a presentation accompanying Inovalon's deal conference call. On a pro forma basis, the combined company would have a client base that is 34% provider.
The combination with ABILITY would accelerate Inovalon's push to increase the number of clients it serves so that less of its business is dependent on its largest 10 clients, said Keith Dunleavy, Inovalon's chairman and CEO, according to a transcript. Since 2015, the percentage of the company's revenue dependent on its top 10 clients has decreased to 53% from 76%, he said.
ABILITY has nearly no client concentration. No single client accounts for even 1% of its revenue, and its top 10 clients generate just 5% of its revenue, Dunleavy said. He emphasized during the call the importance to healthcare providers of having data to analyze and improve performance.
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