The Health Care M&A Monthly: Second Quarter 2010 M&A Results--
A Total Of 223 Deals Announced Worth $46.2 Billion
The second quarter of 2010 saw the announcement of 223 mergers and acquisitions in the health care industry. This figure represents a 3% increase over the 217 deals announced in the previous quarter, Q1:10, but a 6% decrease from the 236 transactions announced in the year-ago quarter, Q2:09.
The four sectors of the health care technology segment, Biotechnology, e-Health, Medical Devices and Pharmaceuticals, produced 119 deals, or 53% of the quarter’s total deal volume while the nine sectors of the health care services segment accounted for the remaining 47%. This represents an upward shift from the previous quarter, when services accounted for 40% of deal volume, and the year-ago quarter, when they accounted for just 37%. The increase in services deals indicates a broadening of the market.
Taken together, the top three sectors, Medical Devices (42), Pharmaceuticals (41) and Biotechnology (25), represent 48% of the quarter’s total deal volume. The laggards were Behavioral Health Care and Rehabilitation, with four deals apiece, and Managed Care with just three. The number of deals for each sector, and their percentage contribution to the total, appears here, along with comparisons to the previous and year-ago quarters.
What They Paid
Based on prices revealed to date, a total of $46.2 billion was committed in Q2:10 to fund the 223 deals. This represents a 77% increase over the $25.6 billion spent in the previous quarter, and a 62% increase over the $28.5 billion spent in the year-ago quarter. The technology segment accounted for $35.6 billion, or 77% of the dollars committed to all health care M&A, with the services segment producing the remaining 23%. This is in line with the previous quarter’s distribution, but represents a shift from the year-ago quarter when technology captured 84% of all M&A dollars, leaving services with just 16%. Here again, we see the market broadening to encompass more activity in the services sector. The percentage contribution of each sector to the $46.2 billion total for Q2:10 appears in this chart.
The top three sectors in terms of dollar volume, Biotechnology, Pharmaceuticals and Medical Devices, together account for 72% of all health care M&A dollars in Q2:10. Due to low individual results, the figures for Long-Term Care, Managed Care, Physician Medical Groups and Rehabilitation had to be aggregated; together, they represent just 0.9% of the quarter’s total dollar volume.
The quarter produced 11 billion-dollar deals worth a combined total of $29.3 billion, or 63% of the quarter’s total dollar volume. The sectors these deals targeted include Biotechnology (three deals, $10.9 billion); Pharmaceuticals (three deals, $8.7 billion); Contract Research Organizations (two, $2.7 billion); Behavioral Health Care (one, $3.1 billion); e-Health (one, $1.3 billion); and Medical Devices (one, $2.6 billion).
The first six months of 2010 have produced a total of 440 mergers and acquisitions in the health care industry worth a combined total of $72.0 billion. If common wisdom holds, and the second half of the year fetches up better than the first, then 2010 is on track to approximate the results of 2004 when 875 deals were announced worth about $164.0 billion. In health care M&A, 2004 ranked fifth during the period 2000–09, well ahead of the recession-plagued years of 2001–03.