The Health Care M&A Monthly: Health Care M&A Results for The Second Quarter of 2001

The second quarter of 2001 saw 210 mergers and acquisitions in the health care sector, up 3% from the 203 deals recorded in the previous quarter. With a total of 96 deals, the four sectors of the health care technology segment accounted for 46% of all deals announced. By contrast, the nine sectors of the health care services segment accounted for 114 deals, or 54% of the total.
The dollar value of the 210 deals announced in Q2:01 totalled $24.4 billion, up 17% from the $20.8 billion expended during Q1:01. Of that amount, approximately $22.4 billion, or 92% of the total, was spent in the technology segment. In the previous quarter, expenditures in the technology segment accounted for $15.6 billion, or 75% of the total.
In the technology segment, the Medical Devices sector posted the greatest number of deals, 29, although this represents a 31% drop from Q1:01’s 42 deals. Roughly $9.5 billion was expended to pay for these transactions. With a more modest 20 deals announced, the Pharmaceutical sector expended $10.1 billion. Together these two sectors absorbed 80% of the health care dollars spent on M&A deals. The chart above clearly shows that this is where the investment community is placing its bets, and where we will likely see continuing M&A activity.
In the health care services segment, the Managed Care sector saw 14 deals with a total dollar value of $637 million. The Hospital sector followed with 18 deals and a total dollar value of $401 million; several of the deals, however, involved mergers for which no dollar value is assigned. The relatively meager amount expended in this sector reflects the fact that the majority of deals are small ones, involving rural hospitals.
Among the poorest performers were the Physician Medical Group sector and the post-acute care sectors, such as Rehabilitation, but for different reasons. With the PPM industry largely discredited, few physicians have the stomach to participate in mergers or acquisitions. Bankruptcies and reorganizations have gutted the Long-Term Care sector, leaving it with little room or capital to make deals. As for the Home Health and Rehabilitation sectors, the changes to the government’s reimbursement system, threatened and real, have kept the providers down so long it looks like up to them.