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

A total of 174 mergers and acquisitions were announced in the health care industry during the third quarter of 2001, down 16% from the previous quarter’s 208 deals. The chart below tallies the deals by sector.
The September 11 attacks on New York and Washington, along with the consequent suspension of the capital markets and an economy already edging towards recession, contributed to this quarter-to-quarter decline.
Ninety-six deals, or 55% of the quarter’s total, involved the four sectors of the health care technology segment; the remaining 78 deals, or 45%, were distributed among the nine sectors of health care services. This reverses the trend from the two previous quarters, in which health care services segment accounted for the majority of deals announced: 54% in Q2:01 and 57% in Q1:01.
The Biotechnology sector recorded the greatest number of deals, 29, for any single sector. It was followed closely by the Medical Device and Pharmaceutical sectors with 26 and 25 deals, respectively.
Within the services segment, the three most active areas were the Hospital, Laboratory and Long-Term Care sectors, with 18, 13 and 11 deals, respectively. M&A activity in other service areas, such as the Physician Medical Group, Behavioral Health and Rehabilitation sectors, in which investor interest has all but dried up, remained relatively inert.
Particularly in the aftermath of September 11, these figures suggest that investors are finding the health care technology segment more stable than its services counterpart. Within the services segment, buyers appear to be favoring the Hospital and Laboratories sectors.
The total dollar amount expended to make the 174 deals in Q3:01 was approximately $7.9 billion. Of that amount, the technology segment accounted for $5.68 billion, or 71% of the total, while the services segment accounted for $2.26 billion, or 29%. Not all sectors within a segment shared equally in the fortunes of that segment. The dollar volume of e-Health deals was only $111 million, or a mere 2% of the technology segment. Similarly, the dollar volume of the Rehabilitation sector amounted to $1.1 million, considerably less than 1% of its segment’s total. The diagram on page 3 displays the percentage of the total amount expended that each sector represents.