The Health Care M&A Monthly: Health Care M&A Results for The Fourth Quarter of 2005

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The fourth quarter of 2005 saw a total of 221 mergers and acquisitions in 13 sectors of the health care industry. This represents a 13% decrease from the 253 deals in the previous quarter, but a 2% increase over the 217 deals in the year-ago quarter, Q4:04.
The Long-Term Care sector captured the greatest amount of M&A activity, as measured by deal volume, with a total of 39 transactions. It was followed by Pharmaceuticals with 30 deals and Medical Devices with 28 deals. Taken together, these three sectors account for 44% of all the M&A activity in the health care industry. At the other end of the spectrum, however, the Rehabilitation sector posted one lone deal.
Only three individual sectors posted increases over both the previous (Q3:05) and year-ago (Q4:04) quarters: Behavioral Health, Biotechnology and Long-Term Care.
The nine sectors of the health care services segment accounted for 125 deals, or 57% of the quarter’s total, with the four sectors of the health care technology segment accounting for the remaining 96, or 43%. This division matches the results from the third quarter when the services segment also captured 57% of that period’s deal volume, and the technology segment 43%.
What They Spent
Based on prices revealed to date, approximately $57.1 billion was committed to fund the fourth quarter’s M&A activity. This represents just a 3% drop from the previous quarter (Q3:05) when a total of $58.9 billion was spent in the M&A market. The dollar contribution of each sector to the total amount appears in the table opposite; its percentage contribution appears in the chart on page 7. Where the third and fourth quarters differ is in the amount committed by the services and technology segments to their respective quarterly totals. In the third quarter, the services segment accounted for $34.2 billion, or 58%, of that period’s $58.9 billion total. In the fourth quarter, however, services accounted for $7.6 billion, or just 13%, of the quarter’s $57.1 billion.
The top three individual sectors to attract funding for M&A include Medical Devices (57% of the total), Pharmaceuticals (18%) and Biotechnology (11%). Long-Term Care (6%), Other Services (3%) and Physician Medical Groups (2%) account for the three other sectors attracting M&A funds of $1 billion or more.
A total of 10 billion-dollar deals were announced during Q4:05, eight in the technology and two in the services segment. Together, they accounted for $44.7 billion, or 78% of the quarter’s total. One deal, it should be noted, has the power to move these figures dramatically: the fate of Boston Scientific Corp.’s (NYSE: BSX) preemptive $25 billion bid for Guidant Corp. (NYSE: GDT), in an attempt to oust Johnson & Johnson’s (NYSE: JNJ) $21.5 offer, has yet to be sealed. We are currently including the BSX-GDT deal in the figures for Q4:05, which will either be confirmed or dispelled in the last weeks of January 2006, when GDT shareholders vote on JNJ’s offer. The pertinent figures will be updated, when and as necessary.
 

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