Digital Health | Q1 2024 Market Review

Inflation remained too high to have confidence for rate cuts in 2024, causing Technology vendors to heavily underperform otherwise booming public markets. Our Digital Health index showed a negative performance of (1.1%) for Q1 2024. Revenue valuations remained at a discount to the NASDAQ at 3.7x. However, profitable index members appeared to have gained ground with our average EBITDA multiple up 8x YoY to 35x.

Digital Health private placement deal value remained near its five-year low, while deal velocity was down 35% over Q4. The pull towards smaller deals grew stronger with over 6 deals out of 10 raising less than $10M in proceeds. Nevertheless, there was a small uptick in larger deals led by Doc.com’s $300M raise from Silver Rock Group. As a result, the average deal size increased to just $20M during the quarter.

Comparatively, the M&A market in Digital Health has proven significantly more active. Deal volume nearly hit 90 deals for the first time in 2 years, while the $11B sale of Cotiviti to KKR pushed total deal value to a 6-quarter high. Nevertheless, smaller deals were overrepresented with 80% of deals in the sub-$50M tranche. The LTM average M&A revenue multiple continued its upward march above 6x, expanding its premium over public markets.