Despite First Quarter Decline, Health Care M&A Remains Robust, According to New Report From Irving Levin Associates, Inc.

FOR IMMEDIATE RELEASE Stephen M. Monroe, Partner
Sanford B. Steever, Editor
800-248-1668
203-846-6800
Fax: 203-846-8300
pressreleases@levinassociates.com
Despite First Quarter Decline, Health Care M&A Remains Robust, According to New Report From Irving Levin Associates, Inc.
NORWALK, CT – April 15, 2008 – According to a new Report from Irving Levin Associates, a total of 221 mergers and acquisitions were announced in the health care industry during the first quarter of 2008, a 27% decline from the 301 deals announced in the prior quarter. Based on preliminary figures, a total of $27.3 billion was committed to fund the first quarter’s M&A activity, representing a 50% decrease from the $54.6 billion spent during Q4:07. Even so, the health care merger and acquisition market remains strong relative to historical levels during the past five years and relative to the recent turmoil in the financial markets.
The Health Care M&A Market First Quarter 2008
Dollar Amounts By Sector*
Sector
Dollar Amount
First Quarter 2007
Percent of  Quarter
Home Health Care
$  1,090,000,000
4%
Hospitals
376,200,000
1%
Long-Term Care
372,314,000
1%
Managed Care
355,500,000
1%
Physician Medical Groups
98,600,000
<1%
Labs, MRI, Dialysis
22,841,000
<1%
Rehabilitation
6,300,000
<1%
Behavioral Health Care
0
Other Services
   2,328,100,000
9%
   Services subtotal
$  4,649,855,000
17%
 
 
 
Medical Devices
$  7,055,230,000
26%
Biotechnology
6,846,451,000
25%
Pharmaceuticals
5,986,360,000
22%
e-Health
2,761,890,000
10%
   Technology subtotal
$22,649,931,000
83%
Total health care
$27,299,786,000
100%
                        *Preliminary Figures
 
The health care technology segment attracted the largest amount of capital, capturing over four dollars out of every five invested in health care M&A. The quarter also posted eight billion-dollar deals, primarily in technology sectors, worth a combined total of $14.8 billion, or 54% of all M&A dollars in Q1:08.

The number of deals announced in each sector of the health care industry appears in the chart below, along with comparisons to the prior quarter (Q4:07) and the year-ago quarter (Q1:07).

 
The Health Care M&A Market Q1:08 – Deal Volume By SectoR

                                                               Q1:08         Q4:07         %            Q1:07          %
Sector                                                 Deals*       Deals    Change   Deals    Change

Services Segment:
Long-Term Care                                 26              23         13%          42       -38%
Physician Groups                                 12              14       -14%            9        33%
Home Health Care                               11                9         22%          10        10%
Hospitals                                             10              15       -33%            9        11%
Labs, MRI, Dialysis                             10              16       -38%          14       -29%
Managed Care                                      7                6         17%            5        40%
Rehabilitation                                         6                5         20%            1      500%
Behavioral Health Care                          3                3           0%            4       -25%
Other                                                   23              32       -28%          20        15%
   Services Subtotal                            108            123       -12%        114         -5%
                                                                                                                  
Technology Segment:
Medical Devices                                  35              67       -48%          39       -10%
Pharmaceuticals                                   34              49       -31%          34          0%
Biotechnology                                      29              47       -38%          35       -17%
e-Health                                              15              15           0%          15          0%
   Technology Subtotal                       113            178       -37%        123         -8%
                                                                                                             
Grand Total                                     221            301        -27%       237         -7%
*Preliminary Figures

 

These results clearly point to the fact that the M&A market in early 2008 has declined from the record-setting peaks of activity set in 2006 and 2007. “After two record-breaking years, both deal and dollar volume in the health care M&A market have slackened,” stated Sanford Steever, Ph.D., editor of The Health Care M&A Report. “While not every year can be expected to shatter existing records, 2008 still promises to have one of the stronger showings in the past five years, particularly in the area of technology-oriented sectors,” added Mr. Steever.

The Health Care industry is continuing to attract interest from potential deal makers. “We all know that borrowing has become more difficult, that real estate has become more illiquid and that financial buyers are largely sitting on the sidelines,” commented Stephen M. Monroe, managing editor at Irving Levin Associates. “But we also know that the health care industry is about as close to anti-cyclic as you can get, that the industry remains fragmented and ripe for consolidation and that money is still available for deal making. Companies still want to grow, and they will pursue deals if that advances their strategic goals.”

“The ups and downs in the financial markets have by no means brought the M&A market to a halt; they have, however, redefined the opportunities the market makes available,” Mr. Steever summarized. “Now that the stock market has sloughed off the ‘acquisition premium’ that had kept it high, a number of well-run companies are attractively priced—but probably not for too long.”

For more information on The Health Care M&A Information Service, The Health Care Acquisition Report or for a subscription to any Irving Levin publication, call 800-248-1668. Irving Levin Associates, Inc., established in 1948, has headquarters in Norwalk, CT and is online at www.levinassociates.com. This privately held corporation publishes research reports and newsletters, and maintains merger and acquisition and venture capital databases, on the health care and senior housing markets.