The Health Care M&A Monthly: Health Care M&A Results for The Third Quarter of 2004

A total of 218 mergers and acquisitions were announced in 13 sectors of the health care industry during the third quarter of 2004. This figure represents just a 5% drop from the 230 deals announced in the previous quarter, Q2:04, and a 7% drop from the 234 deals in the year-ago quarter, Q3:03.
The nine sectors of the health services segment generated 111 transactions, or 51% of the total, while the four sectors of the health care technology segment made up the remaining 49%. The contribution of each sector to the total, along with comparisons to the previous and year-ago quarters, appears in the table below.
The top three sectors in terms of deal volume, Pharmaceuticals, Medical Devices and Long-Term Care, combined accounted for 47% of all deals announced this quarter. By itself, Pharmaceuticals contributed 22% of the quarter’s entire deal volume. At the other end of the spectrum, Rehabilitation produced just three deals.
Based on prices revealed to date, a total of $21 billion was spent to finance the third quarter’s 218 deals. Although this represents an 18% decline from the $25.6 billion committed to fund health care M&A activity in the previous quarter, Q2:04, it is also an 11% increase over the $19 billion spent in the year-ago quarter, Q3:03.
The percentage contribution of each sector to the total amounts appears in the chart opposite. As has been usual in recent quarters, the four sectors of the technology segment accounted for the majority of dollars committed to fund these deals: $13.3 billion, or nearly 64% of the quarter’s $21 billion.
Among the individual sectors, Pharmaceuticals captured the largest share with nearly 47% of the total amount of funds committed, followed by Hospitals with almost 19%. Note that due to their relatively meagre results, the individual figures for the Behavioral Health, Home Health and Physician Medical Group sectors have been aggregated in the chart.
The third quarter saw the announcement of six billion-dollar deals with a combined purchase price of $13.1 billion, or 62% of the quarter’s total. The two largest were in the Pharmaceuticals sector, the next two in the Hospital sector, the fifth in Contract Research Organizations (included in the "Other Services" category) and the sixth in the Medical Devices sector.
Looking back on the year, the first three quarters of 2004 have seen a total of 654 mergers and acquisitions, with $140 billion committed to fund them. Accordingly, the year may end with as many as 875 deals, worth somewhere between $150 billion and $160 billion.