HEALTH CARE M&A FOR 2009 REACHES SECOND HIGHEST LEVEL IN DECADE

FOR IMMEDIATE RELEASE Stephen M. Monroe, Partner
Sanford B. Steever, Editor
800-248-1668
203-846-6800
Fax: 203-846-8300
pressreleases@levinassociates.com
NORWALK, CT – January 19, 2010 – During 2009 and based on preliminary results, a total of 932 mergers and acquisitions were announced in 13 sectors of the health care industry, a 7% decrease from the 1,001 transactions announced in 2008. Based on prices revealed to date, a total of $232.9 billion was committed to finance the year’s 932 deals. This represents a 3% increase over the $226.8 billion in 2008. In terms of dollars committed to M&A activity, 2009 is the second-largest year of the decade, after 2006 with $268.4 billon.

M&A Deal and Dollar Volume for 2009 and 2008*

 

Deal Volume

Dollar Volume

 

 

Sector

2009

2008

% Change

2009

 

2008

 

% Change

Behavioral Health

11

14

-21%

$46,759,000

 

$166,650,000

 

-72%

Home Health

42

47

-11%

114,697,000

 

2,381,082,000

 

-95%

Hospitals

52

60

-13%

1,676,000,000

 

2,579,600,000

 

-35%

Laboratories, MRI, Dialysis

30

41

-27%

66,757,000

 

635,266,000

 

-89%

Long-Term Care

75

96

-22%

4,286,183,000

 

1,835,065,000

 

133%

Managed Care

15

16

-6%

761,500,000

 

1,982,710,000

 

-62%

Physician Medical Groups

41

53

-23%

44,900,000

 

274,540,000

 

-83%

Rehabilitation

11

27

-59%

22,085,000

 

43,305,000

 

-49%

Other

78

123

-37%

6,064,530,000

 

8,944,252,000

 

-32%

   Services Subtotal

355

477

-26%

$13,083,411,000

 

$18,842,470,000

 

-31%

Biotechnology

194

148

31%

$47,533,049,000

 

$93,879,257,000

 

-49%

E-Health

68

69

-1%

11,301,925,000

 

4,168,424,000

 

171%

Medical Devices

175

167

-5%

13,734,984,000

 

69,305,608,000

 

-80%

Pharmaceuticals

140

140

0%

147,223,447,000

 

40,644,108,000

 

262%

   Technology Subtotal

577

524

10%

$219,793,405,000

 

$207,997,397,000

 

6%

Grand Total

932

1,001

-7%

$232,876,816,000

 

$226,839,867,000

 

3%

*Preliminary Figures

 

 

 

 

 

 

 

 

     
  “The national debate over health care reform, which will inevitably impact government reimbursement protocols, has contributed to the slow-down of M&A activity in the health care services sectors. With service providers unable to predict government reimbursement levels, dealmakers cannot easily predict cash flow or establish a ready price for a target business,” stated Stephen M. Monroe, managing editor at Irving Levin Associates, Inc., which publishes The Health Care M&A Report. “Once we gain clarity on the outcome of the reform efforts, we may expect to see an increase in mergers and acquisitions in the services sectors.”
 
The four sectors of the health care technology segment, including Biotechnology, e-Health, Medical Devices and Pharmaceuticals, posted 577 deals, or 62% of the year’s deal volume. A combined total of $219.8 billion, up 6% from 2008 levels, was committed to the technology sector in 2009. “The Pharmaceutical sector grew better than two-and-one-half times over the previous year thanks to two mega-deals in the first quarter,” observed Sanford Steever, Ph.D., editor of the Report. “Due to depressed pricing in the markets in Q1:09, the buyers leapt at the chance to acquire companies at valuations they could not refuse. The real story is that they were able to put together financing packages for such huge deals: this is a clear sign of the underlying robustness of the markets.” Health care M&A activity thus promises to remain steady and strong, particularly in the technology sectors.
 
Given the strengths and success of recent health care M&A activity, not to mention the re-entry of private equity into this industry during Q4:09, could the health care industry give rise to the next economic bubble?  We do not see this in the near term. “Reimbursement pressure on hospitals, physicians and drug makers, among others, will tend to restrain pricing. This downward pressure will help keep valuations and acquisition pricing from inflating into speculative levels,” Mr. Steever noted. “On the technology side, as large and splashy as recent biotech deals have been, they have also been prudently structured on a pay-as-you-go basis: modest upfront payments and large contingent payments that kick in only once significant revenue streams come on line.”

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.

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