The Health Care M&A Monthly: The Premiums They Paid, Part I --

A New Series Explores Premiums In Health Care M&A

This month we inaugurate a series of articles on the premiums that are paid in health care acquisitions and takeovers. The premium/discount is the amount by which the purchase price exceeds/falls below the target company’s share price, generally as priced the day before the deal is announced. Naturally, the occasion for a premium (or a discount) arises in only a subset of the deals we cover. The target must be a publicly traded company, and the entire company, not merely a part of it, must be in play. The rationale for asking a premium may be that there is competition for the target or that management needs “something extra” to cede control of a company that they have grown and become intensely invested in. Analyzing premiums paid may give investors an idea of which sectors of the health care industry offer better returns than others.

We begin by analyzing the premiums paid in the Medical Device sector from 2007 through 2011. This sector has generated the greatest deal volume of any technology sector during this period, and so offers a good range of data. In the table on page 9, we have calculated both the average and the median premiums paid in each year. In all years except 2010, the median is lower than the average, as might be expected. We also plotted a third point for each year which we believe correlates with the rise and fall in the premiums. That third point represents the number of billion-dollar medical device deals in each year expressed as a percentage of all device deals announced during the year.........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today

Premiums Paid for Medical Device Deals 2007-2011