DIGITAL HEALTH REPORT

Ongoing dynamics in the VC and European M&A market

October 2024
VENTURE CAPITAL MARKET OVERVIEW

Strictly Confidential | October 2024 2

Healthcare: A $10 Trillion Global Industry Under Pressure
Rising demand and cost growth with worsening patient outcomes are leading to an unsustainable healthcare system

Rising Demand for Increased Global Healthcare Expenditure Worsening Patient Outcomes

Life Expectancy Stagnation

▪ Life expectancy in the U.S. has stopped increasing since 2010, after decades of steady increase. 84% of high-
of adults income countries experienced a decline in life expectancy post-pandemic
By 2050, the global
worldwide have 573M ▪ This decline in life expectancy is due to high rates of injuries, cardiovascular diseases, metabolic diseases, mental
disorders, and nervous system disorders
population of people aged people are affected by
60% at least one
60 and above is projected cardiovascular diseases
chronic Preventative Care and Wellbeing
to reach 2.1B and diabetes alone ▪ The majority of preventative care interventions are highly cost-effective
condition ▪ More investment is needed to encourage better wellbeing and preventative care to alleviate the cost pressures of
the healthcare system
▪ Exercise is widely documented to outperform drugs in successfully treating mental health conditions as well as
the prevention or delayed onset of heart disease, cancer, and diabetes

Mental Health
▪ 16.4% of teens from ages 12 to 17 experienced a severe mental health condition in the U.S. last year. Of those
of all global of the elderly with major depression, an average of 59.8% didn’t receive mental health treatment
Hospitals spend billions
deaths are due will be living in ▪ Suicide is the second leading cause of death in the U.S. for teens and young adults ages 10–34, and the fourth
yearly on clinical labour. leading cause of death for teens 12–19 years of age
71% to Non- 80% developed
The U.S. alone spent $800B
Communicable markets by
in 2023 Chronic Conditions
Diseases 2025 ▪ The prevalence of chronic conditions is increasing. If current trends continue, by 2050, chronic diseases will
account for 86% of deaths each year
▪ One in two adults in the U.S. suffers from musculoskeletal pain, with treatment amounting to about $380B in
costs per year. Addressing such pain would lead to a major reduction in healthcare expenses

Maternal Health
▪ Women across minority groups also have much worse outcomes in infant mortality, postpartum mental health
Key Takeaway: and premature birth
Between 2000 and 2021, global healthcare expenditure rose from 8.7% to 10.8% of GDP. Rising demand will likely ▪ In the U.S., maternal death rates have increased by 85% between 2017 and 2021. There is a significant disparity
increase expenditure even further, exerting pressure on governments and insurers to adopt cost-effective solutions as black women have three times the mortality rate as compared with white women
like digital health innovations. Moreover, AI, traditional machine learning, and deep learning are projected to save up
to $360 billion per year in total in healthcare spending Key Takeaway:
Despite the rising growth in healthcare expenditure, life expectancy and patient outcomes across many areas have
either stagnated or are on a downward trend, highlighting a need for innovation across different sectors of
healthcare

Sources: World Health Organization, McKinsey Healthcare Reports, WeForum, BMJ, Oxford Journal of Public Health, KVC Health Systems, UK Strictly Confidential | October 2024 3
Health Security Agency, Chief Healthcare Executive.
Digital Innovations are Addressing the Pressures Faced by the Industry
Innovations in Digital Healthcare Provisioning are focused on addressing key areas across the entire patient journey

Healthy/Pre-symptomatic Diagnosis/Prescription Treatment

Europe and the U.S. are rapidly
advancing toward personalised and
Prevention / Wellness Digital Diagnostic Process Dx/Chronic Care patient-centred care. Digital
▪ Sleep ▪ Symptom Checking ▪ Diabetes
▪ Mental Health ▪ Tele-Consultation ▪ Cardiovascular technologies are driving innovation
▪ Nutrition & Weight Loss ▪ Voice Recognition ▪ Mental Health across the healthcare spectrum,
▪ Behaviour Change ▪ Musculoskeletal transforming the patient-provider
▪ (Personalised) Exercise Point of Care Solutions experience from early detection to
▪ Stress Management ▪ Home testing and monitoring for infectious Surgery
▪ Blood Biomarker analysis diseases, Hormones, DNA etc ▪ Data Advanced Procedures / Robotic Surgery
personalised treatment
▪ High-Risk Disease Screening
▪ AI-driven solutions are gaining momentum,
particularly in imaging and diagnostics. For
example, AI-based tools are enhancing diagnostic
accuracy in fields such as breast and prostate
Advanced Imaging Analysis Workflow
Decision making cancer, allowing for earlier detection and more
▪ Radiology, Pathology ▪ Appointment booking and reminders
▪ Overall Prevention Screening (i.e., Cancer) effective treatments
▪ AI Image Analysis & Workflow ▪ Hospital resource mgmt (shift, wards,
▪ Triaging
▪ Other: Dermatology, Ophthalmology etc instrument tracking)
▪ From improving diagnostic accuracy to enabling
personalised treatment plans, digital healthcare
technologies are increasing both precision and
speed of care delivery. These innovations are not
only enhancing patient outcomes but are also
optimising healthcare efficiency, ensuring faster,
more reliable care

▪ This digital transformation plays a pivotal role in

reducing operational inefficiencies. By automating
routine tasks and optimising workflows, healthcare
systems can lower costs, improve resource
allocation, and, ultimately, deliver better patient care
at a lower cost

Improving Outcomes & Efficiency Improving Efficiency Improving Outcomes

Sources: Albion VC, Forbes, Horizon Health

Strictly Confidential | October 2024 4
A Spotlight on Digital Health Providers was Shone During the Pandemic…
A record-breaking surge in investments and transactions occurred during the pandemic

Digital Health Provider Financing (2019-2021) Key VC Investments

Company Description Round Size ($M) / Date Valuation ($M)

$B 5% 8% 7% 5% 4% 4%
Online health startup which sells hair loss
52,7 supplements and erectile dysfunction medication 500 (2021) 5,000
to men

Psychology-based digital health platform that

helps people meet their health and wellness goals 540 (2021) 3,700
from weight management to diabetes prevention
to stress reduction
28,4
25,5 Digital pharmacy startup that takes electronic
prescriptions from doctors through a mobile app 300 (2021) 1,200
17,9 and delivers the medication to a patient’s home or
14.4 office
13,2
7.2
2
7,2 Key Public Listings
2019 2020 2021 2022 2023 2024
Company Description IPO Size ($M) / Date Valuation ($M)

Key Takeaway: Digital healthcare app offering AI-powered 575 (2021) 4,200
diagnosis and telehealth video appointments
▪ COVID-19 drove increased demand for digital healthcare solutions, reflected by the sudden surge in financing
between 2019-2021. Digital healthcare innovation financing grew disproportionally from representing 5% of
global VC financing to a peak of 8% during the pandemic Telehealth platform connecting patients
nationwide to doctors in a variety of specialties, 280 (2021) 1,600
▪ The U.S. led the way, contributing c.70% of the global digital health funding in 2021, with Europe and Asia also including mental health, sexual health,
seeing significant growth dermatology and primary care
▪ There was a notable shift in digital health investments towards mental health, remote monitoring/telehealth, and
AI-driven diagnostics. This was driven by the urgent need for remote care solutions during the pandemic Digital healthcare app linking customers with
lockdowns licensed therapists, allowing therapy to be 300 (2021) 1,400
provided via video chat and text

Sources: KPMG Venture Pulse, Silicon Valley HealthTech Reports, Rock Health, Galen Growth, Pitchbook as of 13/09/24. Notes: 1. Represents Strictly Confidential | October 2024 5
the proportion of VC financing invested into digital health providers. . 2. Represents financings in H1 2024 across US and Europe.
…However, This Spotlight has Faded in Subsequent Years
Funding for digital health providers have dropped significantly since its breakout year in 2021

Digital Health Provider Financing (2022- H1 2024) Key VC Investments

Company Description Round Size ($M) / Date Date Valuation ($M)

$B 5% 8% 7% 5% 4% 4% Provider of on-demand mobile and virtual
52,7 healthcare services. Mobile services include cars
330 (2022) 1,700
staffed with clinicians to provide care at home or
in the workplace
Predictive health analytics platform designed to
analyse physiology data from wearables to predict 320 (2022) 1,320
patient outcomes
28,4
25,5 Healthcare communications platform connecting
doctors, nurses, care teams and patients on a 500 (2022) Undisclosed
17,9 common interface
14.4
13,2
7.2
H2:5.3
7,2
2 Key Public Listings
H1:6.9

2019 2020 2021 2022 2023 2024 Company Description IPO Size ($M) / Date Date Valuation ($M)

An FDA-cleared and CE-marked video game

designed to improve attention function in children 160 (2022) 1,000
Key Takeaway: with ADHD
▪ Rising interest rates and unstable geopolitics have reduced investor appetite across venture capital but Unified AI platform to triage patients, predict
disproportionally towards digital health providers. At $13.2B, digital health funding for 2023 stood at its lowest outcomes and connect them to clinicians in the 61 (2022) 415
level since 2016 hospital
▪ Despite this slowdown, core areas such as AI, mental health, telehealth, and chronic disease management
continue to attract funding. This shift suggests that while the broader market faces challenges, targeted
investments in transformative technologies remain a priority for investors​
Key Takeaway:
▪ There has been a drought in successful digital health providers public listings since 2022. Only Akili and EUDA
▪ H1 2024’s $7.2M overall investment across the U.S. and Europe signals a potential bottom for the fallout in Health went public in 2022 and there were no relevant listings in 2023 and YTD 2024 3
digital health financings as it represents a 4% increase over H1 2023. If annualised, the $14.4M would represent ▪ This can lead to a vicious cycle as a lack of exits lead to lower financing which perpetuates fewer exits in the
a 9% increase to the 2023 total financing value future

Sources: KPMG Venture Pulse, Silicon Valley HealthTech Reports, Rock Health, Galen Growth, Pitchbook as of 13/09/24. Notes: 1. Represents
the proportion of VC financing invested into digital health providers. 2. Represents financings in H1 2024 across U.S. and Europe. 3. Tempus Strictly Confidential | October 2024 6
AI and Waystar have gone public in YTD 2024 but neither are digital health providers.
European Legislation Continues To Drive Digital Innovation In Healthcare
Germany has been at the forefront of digital therapeutics regulation with doctors being able to prescribe apps on prescription (DiGA) since 2020

The Fast Track Process for DiGAs in Germany Timeline of Key Milestones
(entering market within three months)

Regulatory Process Reimbursement Process

1. Classification as a medical device required 1. Prescription of DiGA by the doctor Digital Healthcare Act
2019
The Digital Healthcare Act grants patients the
2. Submission to the Federal institute for Drugs 2. Code Activation: the patient is provided with a
legal right to access care through prescribed
and Medical Devices (BfArM) for review code or activation key by their health insurance
DiGAs become prescribable digital health apps
3. Requirements: Data Security & Protection, User- to active the app 2020
Doctors in the country can prescribe health
friendliness, positive health effects 3. Costs Paid by Insurance: The app's costs are apps to the 73m residents, with insurers
4. Upon approval, the app is being listed in the paid by the public health insurance, making it covering the cost First DiGAs listed
DiGA directory, either as Permanently or free for patients 2020
20 DiGAs were entered into the directory of
Preliminary (depending on clinical proof) 4. For each prescription or request by a patient, the Federal Institute for Drugs and Medical
the public health insurance pays the developer Belgium’s mHealth Rollout Devices in Germany
based on the negotiated price 2021
The platform categorises 26 digital health
apps into three levels, with reimbursement
available at the highest level France’s PECAN Rollout
2023
Notable Investments in Germany The PECAN Initiative enables digital health
apps to receive early reimbursement in
DiGA Prescriptions in Germany France for one year without full clinical proof,
2023 opening the market to German DiGAs
Approx. 374,000 DiGA prescriptions have
Company Description Total Funding Amount been activated for patient use in Germany,
generating approx. >125M in revenues DiGA Listing for Germany
Offering weight management solutions and specialising in 2024
$135 M 64 DiGAs listed: 35 permanent and 21 in
digital therapeutics for obesity and related metabolic disorders testing, with 56% of German doctors having
already prescribed DiGAs
Offering digital therapeutics for chronic pain and
$127 M
musculoskeletal disorders

Specialising in men’s and women’s health, including conditions Key Takeaway:

$28 M
like erectile dysfunction and incontinence The above showcases progressive advancements in digital health regulation across Europe, with Germany
pioneering the integration of DiGAs into the healthcare system, growing from 20 DiGAs in 2020 to 64 apps by 2024,
Focusing on digital therapeutics for mental health such as and generating over 347k prescriptions with approx. >125M revenues in total, setting a framework for other European
$26 M countries to follow, such as Belgium and France
Depression and Anxiety

Sources: Bundesministerium für Gesundheit, Sifted, GKV Spitzenversand, BfArM, Pitchbook, Bitkom, Digitalversorgt
Strictly Confidential | October 2024 7
While Some DiGAs Have Seen Growth, Others Have Experienced Slower Adoption
Four years into launch, the commercial viability still has to be proven

DiGAs with a high potential Surfacing Challenges

Company Recent Growth Traction Number of Patients 2024 ▪ Stringent evidence requirements: Proving sufficient clinical benefit within one year of preliminary listing is
critical for permanent listing and long-term market inclusion. Many applications face challenges in meeting the
Oviva is a virtual weight loss and diabetes clinic that includes in constantly rising standards. In the first year, 25% of new entries were permanent, this ratio has dropped to just
its offering the most prescribed and best-rated DiGA. Oviva’s 5% in 2023. Overall, only 18% of DiGAs demonstrated a benefit at the time of their initial inclusion. In contrast,
>700k
products are tailored to different market needs and are 13% of preliminary listed DiGAs have been removed from the directory. The remaining DiGAs are still under
prescribable in the UK, Switzerland and Germany evaluation
▪ Low Resubscription rates and challenges with user engagement: A significant number of users discontinue
With over 89% of patients activating the app after receiving a using their prescribed DiGA shortly after initial registration or first use, suggesting issues with user engagement
prescription, and more than 80% using it consistently for over a or application efficacy. This impacts the customer lifetime value (CLTV), as lower engagement directly
month in addition to its high clinical validation, ViViRA has been >100k correlates with reduced long-term usage, making it harder for companies to retain users and drive revenue from
experiencing strong adherence, retention numbers, and recurring subscriptions
activation rates
▪ Low initiation rate: Some reports suggest that even when prescribed, about 50% of DiGAs go unused, pointing
The company has established itself as a leading digital urology to a need for better patient education and streamlined processes for accessing these digital tools
clinic, offering the only two permanently listed DiGAs in the >15k
▪ Insolvencies: The failure of DiGA companies like Zanadio and M-sense, emphasises the difficulty in maintaining
urology field
profitability amidst stringent price and reimbursement negotiations and low user retention

Kai Eberhardt, Founder & CEO of Oviva Insolvencies

The adoption of new technologies and processes in Company Reason for Insolvency Insolvency Date
healthcare is notoriously slow, but the shift toward Caused by a significant reduction in the reimbursement rate by insurers,
which dropped from €500 to €218, creating a million $ shortfall for the app's 2023
digital solutions is inevitable, growing each year (Adiposities) developer. Consequently, their assets, were acquired by Sidekick Health
with significant potential. We see DiGA as a key
Failed to show sufficient medical benefit during its DiGA trial period,
element of our offering, expanding patient access resulting in the withdrawal of its listing and large repayment demands from 2022
to effective treatments and steadily
(Migraine) health insurers

gaining momentum Similar to M-sense, the delisting from the DiGA directory subsequently 2022
(Stroke) affected its ability to be reimbursed by health insurers

Sources: Bundesministerium für Gesundheit, Sifted, GKV-Spitzenversand, BfArM, Pitchbook, Deutsches Ärzteblatt, npj | Digital Medicine, IGES, Strictly Confidential | October 2024 8
SVDGV,
Major Growth Hurdles Facing Digital Health Providers
A subset of companies, backed by VCs, require both fast and sustainable growth to secure long-term success

▪ Slow Adoption due to limited awareness among healthcare professionals and consumers about the potential benefits of these technologies. Many healthcare
providers still rely on traditional methods
▪ The majority of healthcare systems lack the necessary infrastructure to integrate digital health solutions into existing workflows seamlessly, limiting their utility and
MARKET ADOPTION appeal to providers
▪ DiGA Example: Although DiGAs can be prescribed by physicians, many are hesitant due to unclear guidelines or lack of trust in the effectiveness of these applications
and the workflow. Meanwhile, DiGA integration into the broader German healthcare system is still lacking, with anticipated future requirements focusing on
interoperability with electronic health records systems

▪ For digital health apps that don’t rely on regulatory approval (e.g., subscription models like Calm or Clue), pricing challenges often revolve around balancing high
operational costs with subscription fees, especially in markets where consumers are used to free healthcare services
▪ For those dependent on insurance reimbursement (e.g., DiGAs), the pressure to demonstrate cost-effectiveness for payers can lead to price reductions, hurting
PRICING profitability
▪ DiGA Example: The average price of prescribed apps in Germany rose by 50% between 2020 and 2023, creating debates about the affordability of these solutions for
public healthcare systems. After the initial market entry, DiGA prices are renegotiated, often resulting in significant price cuts (by approx. 47%), which can hurt
profitability and sustainability. For example, the average initial price for DiGAs in 2023 was ~510 EUR whilst the average renegotiated price was ~ 221 EUR (net price)

▪ Competition, particularly among consumer-facing, is intense due to minimal regulatory barriers to entry. Many solutions, especially consumer-facing apps must stand
out in a crowded market with high competition based on features, user experience, and brand. Therefore, brand loyalty and user engagement become essential
DIFFERENTIATION / differentiators
DEFENSIBILITY ▪ DiGA Example: Many applications target similar health conditions (mental health, diabetes, MSK) with similar prices, making it challenging to differentiate based on
features or efficacy alone​. Moreover, innovating while staying within complex regulatory guidelines, as in Germany, is a constant balancing act. Overly rigid adherence
to regulations can limit innovation, while too much might risk non-compliance, leading to rejection or withdrawal from the market​

▪ Scaling in one country and beyond presents significant challenges as companies navigate diverse market regulations. The biggest cost driver is establishing an
effective sales strategy, which often requires large sales teams and substantial efforts to engage with healthcare providers, quickly escalating operational costs. This
upfront investment in sales infrastructure, alongside marketing expenses, poses as much of a challenge as regulatory hurdles, delaying the timeline to profitability.
COMMERCIALI-
These obstacles not only increase company expenses but also impact investors, who must fund development, commercialisation, and clinical trials, significantly
SATION driving up overall costs
▪ DiGA Example: The go-to-market strategy for DiGAs is still in its early stages, with many companies yet to fully prove the model’s long-term success. While the
potential is clear, widespread adoption and sustainable revenue generation remains challenging in this evolving space

Sources: BMC, Digitalversorgt, IGES, Springer, Biomedcentral,

Strictly Confidential | October 2024 9
A Look Beyond Healthcare Provisioning: Challenges within Incumbent-led Markets
Industry challenges within incumbent-led markets are driving demand for digital product solutions

Drug Discovery Precision Diagnostics Clinical Trials Intervention Management

▪ Drug discovery is becoming slower, more ▪ In the era of precision medicine, more ▪ Obtaining meaningful patient data early ▪ Medical devices, especially implants, are
expensive, and less efficient as easy-to- precise diagnostics are needed to both on to inform decisions about whether to not a one-size-fits-all. Devices are
identify novel targets are picked off over diagnose traditionally hard-to-diagnose proceed, pivot, or halt drug or device increasingly becoming “smart” with digital
time. This concept is known as Eroom’s conditions as well as to further stratify development and wireless capabilities to provide a data
law where the cost of developing a new patients more accurately for disease stream to physicians on patient progress
drug roughly doubles every nine years progression post-procedure resulting in a more
▪ Recruiting sufficient patients within a
connected care pathway
reasonable timeframe for late-stage trials
▪ 90% of drugs fail in the clinic due to a lack ▪ Patients with rare and/or hard-to-diagnose targeting hard-to-diagnose or rare
of clinical efficacy, unmanageable toxicity, diseases often face a long period before conditions ▪ Traditionally invasive procedures and
poor drug-like properties, and/or wrong their condition is successfully identified diagnostics can cause apprehension
patient stratification and effective treatment is provided leading to treatment delays and worsening
▪ Novel tools are required to generate data
outcomes. Digitally-enabled solutions are
to determine drug or device interaction,
▪ Precision diagnostics enablee physicians providing a less invasive solution thereby
▪ As a result, the average cost to bring a optimise the dosing and treatment
to choose the most appropriate treatment improving safety and convenience
new drug to market has increased to procedure, and stratify patients effectively
$2.6B, up from $1.3B a decade ago, with and thereby enhance patient outcomes based on digital biomarkers
R&D costs doubling

Key Takeaway:
Industry incumbents have long faced several problems across product identification and development, commercialisation, and improving treatment outcomes. The rise of technology applications in healthcare will disrupt current workflows
and tackle these issues, incentivising partnerships and acquisitions by industry leaders as they become increasingly digitally-enabled

Sources: JP Morgan, Biopharma and MedTech Deals 2022/23, Rock Health, McKinsey, MassDevice, Nature, KPMG
Strictly Confidential | October 2024 10
The Advancement of Product Platforms in Healthcare
Digital product platforms are tackling longstanding problems through partnerships with industry incumbents

▪ New AI-driven technologies, particularly Explainable AI, are transforming our ability to decode biological mechanisms, potentially leading to new treatment paradigms
Explainable AI ▪ In drug discovery, AI can analyse massive datasets to determine gene expression or protein interactions. Explainable AI breaks down these complex interactions and
pathways to help understand the role of certain genes or pathways as causal drivers of disease

▪ Foundation models are trained using diverse datasets and designed to function across various disease areas, making them more versatile and applicable to a broader
range of scenarios, rather than being restricted to specific use cases
Widely Applicable
▪ Novel models are being developed that analyse tissue samples across various diseases (i.e., cancer, metabolic diseases, autoimmune diseases etc). These
Foundation Models foundation models can be efficiently trained and applied to multiple indications, resulting in a larger TAM and greater scalability across different therapeutic areas,
potentially expanding revenue opportunities

▪ Beyond diagnostics, new technologies not only identify conditions but also predict disease outcomes and inform treatment decisions. By leveraging predictive models
Data-driven Disease on longitudinal data, they forecast disease progression and patient responses to therapies, enabling better patient stratification in clinical trials and driving more
Prediction personalised and effective healthcare solutions
▪ These tools guide healthcare providers on when and how to intervene, making care more proactive rather than reactive

▪ Detailed View of Patient Health: Modern AI tools now combine data from various sources—such as genomic sequencing, protein levels, imaging results, and patient
clinical histories—into one comprehensive analysis. For example, an AI platform might analyse a cancer patient’s genetic mutations, track protein expression, review
Multi Model Data
past imaging scans, and consider the patient’s treatment history
Integration ▪ This integrated approach offers a more complete picture of the patient’s condition, leading to precise diagnostics and customised treatment plans, improving overall
patient outcomes

Key Takeaway:
The combination of explainable and AI Foundation Models, prospective predictive capabilities, and multi-modal data integration have created digital solutions that are not only niche but widely applicable to multiple indications. This scalability
has significantly increased investment opportunities across the healthcare landscape, driving the next wave of clinical success

Sources: JP Morgan, Biopharma and MedTech Deals 2022/23, Rock Health, McKinsey
Strictly Confidential | October 2024 11
Healthcare’s Dual Digital Frontier: Tech-enabled Providers vs Product Platforms
Weighing the opportunities and challenges of two distinct market approaches

Tech-enabled Healthcare Provisioning Data-driven Product Platforms

Pioneering new delivery models with the absence of incumbents Disrupting processes in R&D and product development in strong, incumbent-led markets

▪ Unmet Medical Need-Driven Market: Provisioning digital health solutions unlocks opportunities in ▪ Integration into Existing Systems: Disruptors often have an easier path to market as they focus on
underserved areas of healthcare, where incumbents have yet to establish a presence, offering first- overcoming significant hurdles rather than opening new market segments in the slow-moving healthcare
mover advantages and access to large market. The market is primarily driven by significant medical sector. By improving existing R&D, diagnostic, or treatment processes, they can leverage established
Opportunities

needs caused by gaps in existing treatment options and care pathways, particularly in areas like chronic frameworks for faster, more stable adoption
disease management (i.e., diabetes), where traditional approaches fall short
▪ Partnerships and M&A Potential: Industry disruptors often become prime targets for M&A by larger
▪ Lower regulatory Burden: Regulatory pathways are being significantly simplified for digital solutions. healthcare companies. The strategic value of integrating these disruptive technologies—such as AI for
This means faster go-to-market timelines and fewer costs compared to more regulated solutions diagnostics or automation in clinical trials—can lead to lucrative exit opportunities for investors
▪ Increased Patient Demand: The surge in demand for personalised, patient-centric care can make these ▪ Clinical Validation & IP: Backed by rigorous clinical trials and regulatory approval, these products gain
companies attractive to investors, as they deliver digital solutions directly to patients, meeting trust and adoption from healthcare professionals. In Addition, their complex, proprietary nature offers
expectations for convenience, accessibility, tailored service, and modern healthcare strong protection and differentiation, making them stand out in the market
▪ Scalability: Proven scalability in global markets with existing distribution channels and partnerships
facilitated by incumbents
Challenges

Higher Initial Costs through lack of infrastructure

Opaque exit landscape Dependency on M&A and Incumbents Strong Competition for Market Share
support

Slower Adoption Rates Unpredictable Market Response Regulatory complexity High R&D Costs

Key Takeaway:
This highlights that tech-enabled healthcare provisioning companies have the flexibility to innovate rapidly and respond directly to patient needs in less incumbent-dominated markets. However, these companies face difficulties entering the
market and usually show slow adoption. Data-driven product platforms focus on disrupting existing processes while addressing clear market needs, most of which are from incumbents. They do this with highly differentiated and protectable
product offerings to increase efficiency and effectiveness in many healthcare sectors

Sources: SVB, JP Morgan

Strictly Confidential | October 2024 12
EUROPEAN M&A MARKET OVERVIEW

Strictly Confidential | October 2024 13

 Intro Public market Private markets Conclusion

Digital Health Providers are experiencing rapid growth and transformation, fuelled by advancements
in technology and improved access to healthcare, which makes it an attractive M&A market

Key characteristic and market dynamics

Impacts on the M&A market
Digital empowerment of patients
▪ Transforming patients into active co-creators of their healthcare experience through M&A market driven by the demand for patient engagement platforms, as digital
personalised digital tools and technologies, allowing to generate large customer empowerment tools become essential for personalised healthcare and value-based
base care models

Growth in asynchronous telemedicine Strategic buyers have demonstrated strong interest in healthcare management
▪ Expanding telehealth capabilities to include asynchronous care, allowing for software, seeking to deepen their integration within healthcare ecosystems and
efficient, lower-cost options for managing common conditions and common enhance digital capabilities through targeted acquisitions, as well as in telehealth by
problematics in the availability of treatment acquiring attractive customer pools

Interoperability and enhanced data sharing Over the past few years, the M&A market has been shaped by the ongoing activity of
financial investors, motivated by the need to consolidate and optimise previously
▪ Facilitating improved patient care and operational efficiency by promoting seamless
analogue sub-sectors at both national and international levels, with a strong
health data exchange among healthcare systems, on a national and international
emphasis on profitable targets
level

Increased utilisation of AI
AI-driven diagnostics and predictive models have attracted both financial and
▪ Revolutionising healthcare through leveraging AI to improve patient outcomes by strategic buyers, particularly in areas where AI can enhance patient outcomes and
creating a seamlessly connected health system resulting in accurate predictive drive operational efficiency, and offer an edge to the competition
models and faster diagnostics, thereby possibly achieving the efficacy of the
treatment methods
The growth of remote care models, such as virtual therapies or virtual practitioners,
Expansion of remote and virtual care models has driven a wave of acquisitions in virtual care platforms, as investors looked to tap
into the rising demand for accessible, home-based healthcare solutions, particularly
▪ Meeting consumer demand for accessible care through the growth of telehealth in an aging population
services, virtual hospital wards, and at-home care models

Strictly Confidential | October 2024 14

 Intro Public market Private markets Conclusion

US companies dominate the public market across all three digital health sub verticals
Key listed companies and current valuation levels1

Digital therapies and telehealth Healthcare management software Diagnostics and discovery software
Key players / Comps group
EV/Sales

1.35x 1.03x 2.81x 2.72x 5.08x 5.31x

LTM2 2024E LTM 2024E LTM 2024E

Note(s): 1) As of September 2024 2) LTM = Last Twelve Months Strictly Confidential | October 2024 15
Source(s): Capital IQ as of September 2024, PitchBook
 Intro Public market Private markets Conclusion

Public companies experienced significant growth due to strong momentum and inflated
expectations before and during COVID-19, but are now facing a sustained cooldown in its aftermath
Valuation development

EV/Sales multiples for Digital Healthcare Providers comparable segment over the last five years

2020 2021 2022 2023 2024

Annual
7.6x 8.3x 1.8x 1.5x 1.6x
Average
3.6x 4.9x 3.3x 2.5x 2.7x
12.0x 15.7x 8.3x 7.2x 6.0x

22x
20x Covid-19 peak
18x
16x
Covid-19 outbreak
14x Ongoing market normalisation to
12x pre-Covid-19 levels
10x
8x
6x
4x
2x

07/19 10/19 01/20 04/20 07/20 10/20 01/21 04/21 07/21 10/21 01/22 04/22 07/22 10/22 01/23 04/23 07/23 10/23 01/24 04/24 07/24

Digital Therapy & Telehealth

Source(s): Capital IQ as of September 2024 Healthcare Management Software Diagnostics & Discovery Software
Strictly Confidential | October 2024 16
 Intro Public market Private markets Conclusion

While HMS and diagnostic software experienced a smoother return to pre-COVID levels, telehealth
companies encountered challenges, possibly affecting the long-term confidence of public investors
Contrasting investor confidence

Digital therapy & telehealth Healthcare management software & diagnostics software

▪ Several European countries were fostering a regulatory environment favourable to digital ▪ The global drive towards digitalisation in healthcare and the increased adoption of remote
health solutions by addressing legal barriers through various legislations, such as the Digital solutions were driving growth in healthcare management & diagnostics software
Before 2021

Health Applications (DiGA) in Germany ▪ AI and automation have improved efficiency in diagnostics and healthcare platforms,
▪ Strong customer adoption driven by persistent challenges in healthcare access has elevated boosting investor interest and adoption, esp. in diagnostics and workflow automation
investor expectations, and led to an initial boom in this sector ▪ Regulatory changes and government incentives in regions like the EU have accelerated
▪ A generally bullish sentiment for tech stocks and a liquid market have significantly boosted platform adoption, strengthening investor confidence
the valuation of digital therapy and telehealth companies, driving the median EV/ Sales ▪ The pandemic demonstrated the necessity for robust management systems, which has
multiple to 17.3x, reaching its peak in Q1 2021 attracted considerable investor interest in both sectors

▪ The anticipated adoption rates were not achieved, partly due to slower than expected legal
▪ The focus on cloud and SaaS for data interoperability and streamlined workflows grew, but
adoption at the national level, where national legislations were not able to adapt to the new
fell short of expected growth targets
market conditions
After 2021

▪ Investor sentiment declined due to missed growth targets, pricing pressures, and shrinking
▪ The easing of COVID-19 lockdown restrictions further decreased adoption rates and
valuations
negatively impacted growth forecasts for leading companies
▪ Rising interest rates and tech sector volatility dampened investor overall confidence, with
▪ An increasing number of delistings eroded investor confidence and prompted concerns
many companies reverting to pre-pandemic valuations
about the sustainability of certain business models and their valuation levels
▪ Compared to the telehealth market, companies in these verticals shown a more resilient
▪ A significant tech sector sell-off resulted in a sharp decline in market valuations, returning
business model (also due to the predominant B2B approach)
the valuation of digital therapy and telehealth stocks to pre-COVID levels

Significant overvaluation and under-delivery caused a prolonged decline in investor Steady valuation growth, supported by resilient business models, maintained consistent
confidence, resulting in reduced deal activity (M&A) demand (M&A)

Strictly Confidential | October 2024 17

 Intro Public market Private markets Conclusion

Several notable European IPOs from 2021 have shown weaker long-term performance, reflecting a
decline in investor confidence and a growing hesitation toward IPOs as an exit strategy
Overview

Recent IPOs Date

Raised amount
Description Exchange
Performance since
Status Commentary
in EURm IPO

Developer of personalised dosing systems for patients

02/19/2022 2.33 +2.41% Delisted Volatility and profitability issues
with Parkinson’s disease
Nordic ▪ Many digital health companies have been unable to
generate sustainable profits after IPO, leading to
Develops of digital injectable medication systems for significant share price losses
12/15/2021 25.00 -93.41% Delisted
homecare patients

12/10/2021 27.02
AI-powered software for medical image analysis,
-18.80% Listed
Declining investor enthusiasm
enhancing accuracy and efficiency ▪ The initial enthusiasm of investors was dampened when
Nordic
it became evident that the projected profitability targets
were frequently not achieved
Diagnostic kits for genetic testing, specialising in
12/10/2021 33.67 +38.13% Listed
complex DNA analysis
Nordic

Developer of advanced wearable electrostimulation Regulatory risks

12/10/2021 0.14 -43.10% Delisted ▪ Stringent data protection and patient safety regulations
systems
increased investor uncertainty and slowed IPO success

Developer of solutions for restoring movement after

10/21/2021 75.22 -62.64% Listed
spinal cord injuries
Amsterdam
Strong competition
Developer of digital therapeutics solutions against ▪ Increasing competition in the telemedicine and digital
10/07/2021 2.02 -97.79% Listed health market led to uncertainty about long-term market
Alzheimer’s disease
Nordic leadership and growth

Provider of wearable monitoring solutions to enhance

07/28/2021 235.36 -69.40% Take-over
personal safety and support Dependence on adoption
▪ Sustainable success, particularly for mental health
platforms, is heavily dependent on continued consumer
Developer of genetic testing solutions for the
12/10/2020 19.83 -82.20% Listed and institutional adoption, making IPO prospects
prevention of cardiovascular diseases
uncertain

Source(s): Capital IQ as of September 2024, PitchBook

Strictly Confidential | October 2024 18
 Intro Public market Private markets Conclusion

Private markets experienced soaring valuations, though the growth was less significant compared
to public markets, with strategic investors often paying a premium over financial investors
EV/Sales multiples1 paid by financial and strategics buyers over the last five years

Insights
6.6x 19.8x 26.3x 9.1x 12.3x 11.8x
4.8x 4.0x 15.3x 1.5x 13.4x n.a. ▪ Compared to public market valuation the private market
25x
experienced also a peak in 2021, however did not reach
the same levels (only in individual cases). The overall
valuation in private markets were driven by high
available liquidity in the market (strategic buyer and PE),
20x as well as a highly bullish market sentiment

▪ Based on available data, strategic buyer were paying

15x higher multiples compared to financial buyers until 2022,
mainly driven by strong cash position and an urge to
digitalise the existing core business, expand its product
offering or acquire new customer groups
10x

▪ In 2022 the overall valuation level collapsed, which was

also trigger by bearish public markets, and an ongoing
5x off sell of digital health stocks. Since 2023 the private
markets were able to regenerate and stabilise the
valuation levels

0x
2019 2020 2021 2022 2023 2024YTD2

0.3x 1.2x 0.7x 1.2x 2.9x 2.1x ▪ Despite the overall market conditions are improving, a
return to 2021 levels is not expected
3.3x 0.9x 6.3x 0.2x n.a. n.a.

Note(s): 1): Excluding individual outliers; include only

publicly available data; 2) Data included up to Valuation range Max. / Min. by strategic buyers
September 2024 Strictly Confidential | October 2024 19
Source(s): Capital IQ as of September 2024, PitchBook Median range from 1st to 3rd quartile Max. / Min. by financial investors
 Intro Public market Private markets Conclusion

Prominent M&A transactions in the European region

Selection of recent M&A transactions1

acquired by acquired by acquired by acquired by acquired by acquired by

September 2024 August 2024 July 2024 June 2024 May 2024 April 2024

EV: n.a. EV: n.a. EV: n.a. EV: n.a. EV: n.a. EV: n.a.
EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a.

acquired by acquired by acquired by acquired by acquired by acquired by

January 2024 October 2023 October 2023 August 2023 May 2023 March 2023

EV: n.a. EV: n.a. EV: n.a. EV: 1,430 EV: Conf. EV: n.a.
EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: n.a. EV/EBITDA: Conf. EV/EBITDA: n.a.

acquired by acquired by acquired by acquired by acquired by acquired by

November 2022 October 2022 July 2022 February 2022 September 2021 August 2021

EV: 0.3 EV: 102 EV: 562 EV: n.a. EV: 80 EV: Conf.
EV/EBITDA: n.a. EV/EBITDA: 3.7x EV/EBITDA: n.a. EV/EBITDA: n.a. EV/Revenue: 19.4x EV/EBITDA: Conf.

Note(s): 1) EV in EURm Strictly Confidential | October 2024 20

Source(s): PitchBook Deal advised by Carlsquare
 Intro Public market Private markets Conclusion

The European M&A market is strongly characterised by the participation of strategic investors
seeking innovation and market expansion, as well as entry opportunities into the European market
Deal activity

Number of transactions in Europe (European target) Insights

Deal activity ramp-up

+109% ▪ Deal activity saw strong growth beginning in 2019, continuing to expand through 2020, and
-53% reaching its peak in 2021, alongside public market trends. Strategic investors were the primary
121 drivers of deals, accounting for approximately 75% of M&A transactions in 2019 and about 70%
in 2021. This was followed by an increase in financial buyers in 2021 and a surge in IPOs, which
12 also peaked that year

93 European IPOs
3 Potential ▪ European IPO activity peaked in 2021, fuelled by a highly liquid market and strong demand from
83 pivotal retail investors. Although Europe was not the most active IPO market, many companies went
7 year for public during this time. As the pandemic eased, demand for digital health services dropped, and
M&A numerous companies became overvalued, resulting in declining share prices and hesitancy to
pursue new IPOs
87
58 57
4 52
72
1 Financial investors
63
▪ Financial buyers increased their investments, but their volume remained lower than that of
44 strategic buyers. This was primarily due to the limited number of investors targeting the digital
43 38 health sector, as well as the strong activity of strategic buyers who were willing to pay premium
valuations

22 18
11 13 13 13
Deal activity reduction and ongoing recovery
2019 2020 2021 2022 2023 2024YTD1 ▪ Starting from 2022 a reduction of deal activity both for strategic buyer and financial buyer can be
observed. This can be traced back to a challenging financing market for financial investors, and
in general saturated market for strategic buyer. Starting in 2024 a recovery can be observed,
IPO Corp/Strategic M&A Financial Sponsor representing a potential pivotal year for the M&A market

Note(s): 1) Data included up to September 2024 Strictly Confidential | October 2024 21

Source(s): PitchBook
 Intro Public market Private markets Conclusion

While healthcare management systems maintained a consistent deal count driven by high demand
for stable and profitable business models, telehealth is experiencing an ongoing deal reduction
Buyer activity

Insights Number of transactions by subvertical conducted by financial investors

Rapid surge and decline in deals across all subverticals 22

▪ Strategic buyers outpaced financial investors across all segments, especially in diagnostics & discovery and 2
healthcare management software, with financial investors declining sharply post-2021, while strategic buyers 18
maintained stable interest 4
13 11 13 13
11
3 7 4 3
2 1 2
3 2
Post-pandemic decline and stabilisation
▪ After 2021, telehealth and digital health deals dropped due to reduced demand and regulations but began 9 9 7 7 8
6
stabilising in 2022, with strategic interest shifting towards diagnostics and healthcare management software
2019 2020 2021 2022 2023 2024YTD1

Diagnostics growth slows amid market saturation

▪ Diagnostics and discovery software experienced strong growth from 2019 to 2021, driven by advancements in
AI and precision analytics. However, from 2022, market saturation and increased caution among investors –
Number of transactions by subvertical conducted by strategic buyers
especially due to questions regarding longevity of the business models

87
Healthcare management software remains a key focus
20 72
▪ Despite a decline in overall transactions, healthcare management software has maintained consistent interest,
63
especially among strategic buyers, due to its ongoing importance in hospital digitisation and operational
23
efficiency 17
43 36 44
38
13 12
24 31 8
Rising regulatory challenges temper investor enthusiasm 10 13 15
▪ As stricter regulatory frameworks and health data privacy laws are introduced across Europe, digital health 31
20 22 18 19 15
companies face increasing scrutiny. This has tempered investor enthusiasm, particularly among financial
investors, who are now more cautious in committing capital to the sector 2019 2020 2021 2022 2023 2024YTD1

Diagnostics & Discovery Software Healthcare Management Software

Digital Health & Telehealth
Note(s): 1) Data included up to September 2024 Strictly Confidential | October 2024 22
Source(s): PitchBook
 Intro Public market Private markets Conclusion

Although strategic US investors dominate the market as a country, most strategic investors
originate from the European region, reflecting a robust regional investor market
Buyer activity

Overview

Number of deals by region of strategic investor (2019-20241) Market insights

Product innovation
243
▪ Strategic acquires have been particularly interested in innovations that go beyond sole
digitalisation, but enable additional value in healthcare through levering data and remote care
options to personalise medicine, and treatment outcome
58 49 46 40
19
Geographic expansion
▪ US-based strategists have a significant presence in European M&A deal activity, leveraging their
expertise from a more technologically advanced US market to drive sector consolidation on
European soil, thereby offering European targets the entrance into the highly attractive US market

Top 5 most frequent financial investors by deal count (2019-20241) European investors
▪ European strategic investors dominate the European M&A market, driven by local knowledge and
understanding of the legal framework, thereby offering potential targets an easier integration,
compared to US buyer
10

6
Top buyers’ rationale
4 4
3 ▪ CGM (GER) is consolidating its position in Europe, particularly in Germany, by acquiring
healthcare software companies, especially in the hospital segment
▪ Vitalhub (CAD) is expanding in Western Europe through strategic acquisitions in integrated care
and management software across different verticals
▪ ResMed (US) is growing its European footprint by acquiring firms in sleep monitoring and
hospital information systems in respiratory care, consolidating its position in the market

Note(s): 1) Data included up to September 2024 Strictly Confidential | October 2024 23

Source(s): PitchBook
 Intro Public market Private markets Conclusion

Selected key transactions of strategic buyers in EU – push for digitalisation and customer access
Key M&A transactions1

▪ EMIS Group provides healthcare software

▪ Exocad provides dental CAD software for
focused on electronic patient records for the
digital dentistry and workflows. Align
UK. UnitedHealth Group is a global
specialises in clear aligner orthodontics and
healthcare company offering insurance and
digital dental solutions
acquired by technology-driven healthcare solution acquired by

Rational Rational
August 2023 April 2020
▪ The acquisition of Exocad strengthens the
▪ The acquisition helps the combined
Align digital platform that delivers innovative
EV: 1,430.0 company to provide better services to the EV: 388.4 tools and features for diagnostic, restorative,
EV/EBITDA: n.a. state-run National Health Service EV/EBITDA: 29.7x etc. workflows

▪ Medifox provides software solutions for care ▪ Operator of a healthcare consultation

and therapy management in healthcare. platform based in Stockholm, Sweden. The
ResMed is a global company offering cloud- company's web-based software tool allows
connected devices and digital health patients to consult doctors, nurses and
acquired by solutions for sleep and respiratory care acquired by psychologists through chat or video

Rational Rational
November 2022 June 2024
▪ The acquisition of Doktor24 strengthens
▪ The acquisition builds on ResMed’s existing
Doktor.Se’s position as a leading telehealth
EV: 981.0 business in Germany as a provider of EV: n.a. provider in Sweden, with expanded market
EV/EBITDA: 45.8x innovative cloud-connected medical devices EV/EBITDA: n.a. reach and user engagement potential

Note(s): 1) EV in EURm Strictly Confidential | October 2024 24

Source(s): PitchBook
 Intro Public market Private markets Conclusion

While regulatory environments acted as a M&A driver for digital frameworks between 2019 - 22,
success in M&A was constrained by complex approval processes and reimbursement hurdles
Case study: Digital health reimbursement

Other European systems

▪ Increased demand for digital therapeutics: ▪ Strategic integration: Healthcare providers ▪ Pandemic-driven surge: COVID-19 spiked ▪ Several European countries, including the
DiGA initiative boosted demand for digital and insurers acquired patient engagement mHealth adoption, with strategic and UK, Denmark, and Sweden, have advanced
therapeutics by integrating health apps into platforms to enhance service quality, financial buyers investing in mobile health digital health frameworks but lack formal
mainstream healthcare with public insurer access healthcare data, and stay platforms to meet post-pandemic demand reimbursement systems like Germany’s
reimbursement competitive through reimbursement by DiGA
health insurers ▪ Competitive advantage and funding
▪ Low-risk high reward perception: DiGA- programmes: Reimbursable digital ▪ Nations such as the Netherlands, Finland,
certified digital health platforms were seen ▪ Surging demand for patient-facing tools: therapies offer competitive advantages and Austria are developing digital health
as low-risk, offering long-term growth Buyers saw value in PECAN’s patient- and access to government funding systems, while Spain, Italy, and Switzerland
through stable reimbursement models centric care, treatment management, and programmes are in earlier stages of integration and
provider communication tools reimbursement efforts
▪ Consolidation of certified platforms: ▪ Profitability & Cash flow considerations:
Consolidation efforts, especially by ▪ Value-based care as a growth driver: Companies with recurring revenue models, National system adoption:
strategic buyers, targeted DiGA certified Preventive care and improved patient due to having reimbursement agreements
platforms engagement drive cost savings within the with health insurers, became key M&A NHS Digital SNS
healthcare system which incentivises targets
eHealth Kanta
healthcare providers to support digital
healthcare tools by e.g. reimbursing costs Inera ELGA
Digital Health eHealth
FSE

▪ DiGA did not achieve long-term success, complex approval processes and insurers’ strong pricing power make market entry and profitability challenging for startups
▪ PECAN and mHealth have demonstrated more success in terms of adoption than DiGA. Nonetheless, all three systems are confronted with comparable challenges in relation to regulatory compliance, pricing and
reimbursement obstacles
▪ Overall, the expected growth rates failed to materialise, making reimbursable digital health still a niche-market for M&A transactions

Strictly Confidential | October 2024 25

 Intro Public market Private markets Conclusion

US financial investors demonstrate strong interest in the European market, whereas European
investors maintain dominance within the market
Buyer activity

Number of deals by region of financial investor (2019-20241) Market insights

67
Geography
▪ There is a notable presence of US investors in the European market with 17 deals to date.
Nevertheless, European investors hold a dominant position with 67 total deals, due to their
understanding of regional demand and regulatory environments

17 20
12 11
6
Sustainable market growth potential
▪ American PEs have identified attractive investment opportunities in Europe, where they also see
potential for growth and the ability to diversify their portfolios geographically

Top 5 most frequent financial investors2 (2019-20241)

Profitability as the main criterion
▪ Digital healthcare product with stable profitable forecasts were the main target for financial
5 investors, esp. healthcare software; growth companies were not considered to be within the
investors’ remit for a classical buy-out transaction
4
3 3
2 Acquisition rationale
▪ Ardian made targeted acquisitions for their buy and build strategy of their portfolio company
Dedalus
▪ Main Capital's investments were in the field of healthcare software and virtual care which have
demonstrated stability over the past five years
▪ Flexstone, Summa Equity, and Five Arrows have also made strategic investments in healthcare
management software solutions

Note(s): 1) Data included up to September 2024; 2): Only lead investors were considered Strictly Confidential | October 2024 26
Source(s): PitchBook
 Intro Public market Private markets Conclusion

Selected key transactions of financial investors in EU – push for consolidation and strong
profitability
Key buyouts1
▪ Almerys provides digital solutions for health ▪ Civica provides software solutions for public
data management and secure electronic sector organisations, focusing on improving
transactions. EMZ Partners is a private operational efficiency and service delivery.
equity firm specialising in supporting mid- Blackstone is a global investment firm
sized companies through flexible financing specialising in private equity, real estate, and
acquired by solutions
acquired by alternative asset management

Rational Rational
October 2022 May 2024
▪ EMZ Partners acquired Almerys to ▪ BlackGstone acquired Civica to enhance its
EV: 102.4 strengthen its position in the digital services EV: 2,330.0 position in the public sector software
EV/Sales: 1.7x sector, leveraging Almerys’ expertise in EV/Sales: n.a. market, capitalising on Civica’s expertise in
EV/EBITDA: 3.7x health data management EV/EBITDA: n.a. delivering critical software solutions

▪ Softway Medical offers healthcare software ▪ System C provides healthcare software

solutions focused on hospital management and solutions, focusing on electronic patient
patient care. Five Arrows Principal Investments is records and care management. CVC is a
a private equity firm that invests in high-growth global private equity firm specialising in
companies across healthcare, business services, investments across various industries,
acquired by and technology sectors acquired by including healthcare and technology

Rational Rational
December 2019 February 2021
▪ Five Arrows Principal Investments acquired ▪ The acquisition aligns with CVC’s strategy to
EV: 250.0 Software Medical to strengthen its position EV: 317.5 invest in high-growth sectors and expand in
EV/Sales: n.a. in healthcare technology, focusing on EV/Sales: 6.1x healthcare, technology, particularly in digital
EV/EBITDA: n.a. innovative software solutions EV/EBITDA: 39.9x patient management

Note(s): 1) EV in EURm Strictly Confidential | October 2024 27

Source(s): PitchBook
 Intro Public market Private markets Conclusion

Key considerations to maximise the chances of an exit to a strategic or financial investor

Exit considerations

Regulation Profitability & cash flow Consolidation potential TAM & growth potential Level of internationality
Strategic investor

▪ Reservedness before unclear ▪ Lacking profitability can be a ▪ Of some importance, if it is ▪ Strong focus on complementary ▪ Of limited interest if the
regulatory situations of potential deal breaker in case it dilutes the possible to reach a customer base, which allow company is a national leader, or
business models, which might current EBITDA of the buyer monopolistic/oligopolistic cross-selling and wider service a niche leader
“infect” the larger organisation, position in the market roll-out
▪ Strong customer base and ▪ However favourable if the
by making it comply with
cross-selling potential might ▪ In general, not a topic, as the ▪ Intrinsic growth potential, less business model allows seamless
national regulatory frameworks
substitute limited or below focus is to integrate the services important, if the business can scaling in different regions
(e.g. Bafin etc.)
average profitability in an existing portfolio generate positive synergies with
existing units
Financial investor

▪ Highly critical of strictly ▪ Buy-out funds lay high emphasis ▪ Can be a topic of discussion, in a ▪ Addressable market of ▪ Of high importance if
(buy-out)

regulates business models, in a of cash flow generation, as the fragmented market with importance, to the degree of internationalisation is key to
market with strong competition general transaction structure is a consolidation potential sustainable growth future growth and profitability
leveraged buy-out (debt-
▪ If the regulation acts as a ▪ In general, a target is screened ▪ TAM will be considered, however ▪ Also, of high importance in a
financed)
defence mechanisms and strong whether it can be positioned as a more as a validation of the saturated national market
entry barrier, this might be seen ▪ Exit optimisation request solid or platform investment and be used presented business case environment
as favourable growing profitability levels as a buy and build vehicle

Importance for High Low Strictly Confidential | October 2024 28

investor:
 Intro Public market Private markets Conclusion

Conclusion and outlook

If you are considering an exit:

There is a high chance that you will You should show profitability, have a You should have an established You should not expect to achieve the
be acquired by a strategic investor secured business model with major reporting structure and track all key valuation multiples seen in 2021 and
from Europe regulatory issues resolved, and KPIs, which should culminate in a should be prepared to accept the
present a clear USP to potential concrete business plan, including current market levels,
buyers (“reason to exist”) P&L, Cash Flow, and Balance Sheet with the possibility of additional
premiums being paid in individual
cases

Outlook:

We anticipate a more liquid market Strategic investors are expected to Investors are expected to place a We foresee growing activity in the
moving forward, with deal activities continue playing a major role in the strong emphasis on profitability and healthcare management software
increasing in volume during the M&A market, alongside more business model sustainability, sector as healthcare systems begin
second half of 2024 and 2025, acquisitions by US investors, particularly financial buyers renewing fundamental tools and
returning to pre-COVID levels purchasing at reasonable levels workflows
relative to the US market

Strictly Confidential | October 2024 29

Christoph Massner Junkai Zhu Zeynep Gündüz
Principal Analyst Junior Analyst
[email protected] [email protected] [email protected]
+49 30 4672 4700 +49 30 4672 4700 +49 30 4672 4700

Caspar Stauffenberg Min-Sung Sean Kim Maksim Ivanutin

Managing Partner Industry Advisor Associate
[email protected] [email protected] [email protected]
+49 89 255 49 53 11 +49 151 152 114 49 +49 89 255 4953 213

Strictly Confidential | October 2024 30