The Health Care M&A Monthly: Year Posts $206.5 Billion In Deals--
913 Deals Reported In 2010 Health Care M&A Market
While the health care industry was the second most active sector in the overall 2010 M&A market, following first place energy and power, the mainstream media did its best to hide this industry and its robust activity from the general public. This may be due in part to the fact that health care stocks, particularly those of drug companies, posted very modest gains for 2010, compared with go-go industries such as technology. Still, with headlines throughout the year linking the health of the economic recovery to this merger or that acquisition, we are puzzled why the health care industry should figure so dimly in the general business media. We hope to redress that imbalance here.
Based on preliminary results, the 2010 merger and acquisition market for the health care industry saw the announcement of 913 transactions. While this figure represents a 3% decrease from the 945 deals announced in 2009, it remains well within the range of annual deal volume established over the past decade. The health care technology segment posted 478 deals, or 52% of the year’s total, while the corresponding services segment accounted for the remaining 435 deals (48%). Among individual sectors, Medical Devices had the highest tally, 165 deals, representing 18% of the industry’s deal volume, followed by Pharmaceuticals with 125 deals (14%), Biotechnology with 114 (12%) and Long-Term Care with 97 (11%). The most meager results appear—not unexpectedly—in the services segment with Managed Care’s 13 deals, Rehabilitation’s 12 and Behavioral Health’s seven.
According to prices revealed to date, these 913 deals are worth a combined total of $206.5 billion. At the annual level, the usual division between technology and services deals reasserted itself. The 478 technology deals are worth $142.4 billion combined, or 69% of the total, with the 435 services deals worth $64.1 billion (31%). The three largest sectors in terms of dollar volume are Biotechnology with $56.0 billion, Medical Devices with $41.5 billion and Pharmaceuticals with $38.1 billion. All the services sectors recorded at least $1.0 billion in dollar volume, except for Physician Medical Groups and Rehabilitation. The facility-based sectors fared quite well, with Hospitals posting $17.4 billion and Long-Term Care posting $11.7 billion for the year. The chart opposite presents the percentage contribution of each sector to the dollar volume of the overall health care M&A market in 2010, with the three lowest-volume sectors being aggregated.
The year 2010 recorded 43 billion-dollar deals, worth a combined total of $134.9 billion, or 68% of the total amount. Forty deals were announced with price tags in the range of $500.0 million up to $1.0 billion; their combined value is $27.8 billion. In the range of $100.0 million up to $500.0 million, 141 deals were announced worth a combined total of $35.5 billion. This pattern suggests that deal makers still favor the middle market; indeed, it may be this focus on the middle market rather than the splashy mega-deals that keeps the health care M&A market out of the mainstream media and general public.