KPMG Digital Health Sector Update: August 2022

Digital Health Sector Update: recent market development and deal activity

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In Q2/22, global Digital Health funding and M&A fell 32% and 42%, respectively, from the previous quarter, continuing the decline from record highs in 2021. The decrease in funding and deals affected almost all sectors across Digital Health except for Health IT, mirroring the broader downtrend in venture funding and M&A activity. However, this publication sheds light on most important segments and drivers of the Digital Health sector as well as on impactful trends, focusing on the European market and deep diving into the German market. In attempt to successfully address ongoing healthcare challenges, especially during the COVID-19 pandemic, the topic of increasing digital convergence of the healthcare industry has never been more relevant. In the short- and medium-term new technologies are leading to increasing investment opportunities for businesses and investors. We have analysed notable M&A transactions and funding rounds, respective drivers for recent acquisitions in the sector as well as the valuation environment and performance of Digital Health companies across the globe, enriched with expert interviews from relevant industry participants.
In this issue:

  • Market overview: Digital Health is the fastest growing segment within the global healthcare market. Especially in the European market, the pandemic led to key behavioral changes that accelerated the adoption of Digital Health, including an increasing number of startups and technology companies. Furthermore, governmental support of the digital transformation in the healthcare sector facilitates the development of a resilient healthcare system for the future.
  • Investment activity: Acquisition appetite for Digital Health targets has been increasing in the previous years with both strategic and financial sponsors seeking to add innovative players to their portfolio. Venture investments in healthcare nearly doubled in Europe in 2021, rising from €7.4bn in 2020 to €12.2bn in 2021. Furthermore, funding and investments in innovative healthcare technologies like electronic health records management or apps on prescription almost doubled. M&A activity in the top sub sectors Platforms, Telehealth and Mobile/Apps in Europe increased significantly to 156 deals in 2021.
  • Valuation environment: Digital Health stocks are significantly outperforming the market trading at 20x EBITDA. Healthcare - focused indices delivering an overall return of more than 123%. This reflects the tremendously high innovation potential that investors see in technology to further shape the global healthcare market.

We would like to thank you for your interest in our Digital Health Sector Update.