The Health Care M&A Monthly: The 2012 Billion-Dollar Club -

Slowing Down: Just 31 Buyers Spent $82.6 Billion

The U.S. economy is still sluggish, and that seems to be the case in the health care M&A market in 2012.  The number of billion-dollar deals announced by early December was off by 9% compared with 2011, and the combined total spent on those billion-dollar deals decreased by 36.9% compared with the year before.  The year isn’t over yet, of course. The most recent mega-deal announcement, Baxter International’s (NYSE: BAX) $4 billion takeover of Gambro AB, came on December 4 and may not be the last of the year.
Still, it would be hard to top 2011 totals in the remaing weeks. Based on preliminary figures, 2012 had 31 buyers who had committed $1 billion or more for health care businesses, for a combined total of $87.0 billion. By contrast, in 2011, 34 buyers paid $1 billion or more, for a combined total of $137.9 billion.

Top-spenders in 2012 were tightwads—or drove better bargains, depending on your point of view.  The largest deal announced so far hit a mere $7.3 billion, paid by Aetna Inc. (NYSE: AET) for Coventry Health Care, Inc., (NYSE: CVH) in August. That total marks a whopping 75% decrease from last year’s largest acquisition, in which Express Scripts, Inc. (NASDAQ: ESRX) ponied up $29.1 billion for Medco Health Solutions, Inc., (NYSE: MHS).

Total deal volume—including those less than $1 billion—also lagged the previous year, but not by much.  The total of 969 deals announced by early December 2012 was off by only 3.4% compared with 1,003 announced in all of 2011.  As noted, that percentage will change as the year winds down.

The Year’s Top 10 Deals

The top-10 M&A deals so far have a combined total of $50.4 billion, less than half (-54%) of the $110 billion total reached by the top-10 deals in 2011.  The services sector accounted for six of the top 10 acquisitions to the technology sector’s four.  The single deal in the “Other” category was for Catalyst Health Solutions, Inc. (NASDAQ: CHSI), a full-service pharmacy benefit management company, to be acquired by another pharmacy benefit management company, SXC Health Solutions, Inc. (NASDAQ: SXCI) which is categorized under the services sector.

Comparing this year’s top-10 deals to those in 2011, dollar volume was not down across the board in every sector. There were clear winners and losers. For example, the Medical Device sector saw a 78% decrease from $34.4 billion spent in 2011 to $7.7 billion in 2012. Pharmaceuticals also dropped by 36%, from $20.4 billion in 2011 to $13 billion in 2012. However, deals in the Managed Care sector posted a blazing 334% increase, from $3.8 billion in 2011 to $16.5 billion in 2012 on a dollar volume basis. The difference was not due to one deal. In 2011, only one Managed Care deal made it into the top 10, compared with there in 2012. The increase in Managed Care activity most likely can be attributed to these companies preparing for a high-volume, lower margin environment in 2014.........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today