HEALTH CARE SERVICES M&A SET FOR REBOUND AFTER DECLINE IN 2009, ACCORDING TO IRVING LEVIN ASSOCIATES, INC.
|FOR IMMEDIATE RELEASE||
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
NORWALK, CT – March 30, 2010 - Merger and acquisition activity in the health care industry’s service sectors reflected the impact of the credit crunch and the economic downturn. A total of 371 deals were announced in nine sectors of the health care services industry, the lowest level in the five-year period 2005-09. Further, the dollar volume spent on M&A activity dropped 39% from $18.2 billion in 2008 to $13.2 billion in 2009. "While the 2009 merger and acquisition market for health care services reflected recent economic woes, it also marked a turning point as the economy began to climb out of the Great Recession. As in 2008, the 2009 M&A market was characterized by an absence of mega-deals, but an active middle market, particularly in consumer-oriented sectors," commented Sandy Steever, editor of The Health Care Acquisition Report, Sixteenth Edition.
The Hospital acquisition market mirrored the general market trend from the mega-deals of years past into the middle market in 2009. Fifty-two transactions were announced in 2009 involving 80 hospitals with 10,604 beds for a combined total of $1.7 billion. This represents a decrease from the $2.5 billion that was spent in 2008 to acquire 78 hospitals with 5,282 beds in 60 deals. However, certain crucial indicators of hospital pricing rose in 2009 from their levels in 2008 and 2007, with a median price-to-revenue multiple of 0.77x and a median price per bed of $382,920. Both multiples stand at the high end of values for the period 2005-2009, and reflect the low level of bankruptcy and distressed sales in 2009. Stephen M. Monroe, a partner at Irving Levin Associates, commented: "With just one distressed facility sale for 2009, the targeted hospitals tended to be of higher quality and greater financial stability than in previous years, and so could command higher prices on average. On the flip side, however, with the market feeling the effects of the Credit Crunch, it also appears likely that hospitals faced with bankruptcy in 2009 were unable to find financially robust buyers."
In other highlights, merger and acquisition activity in the Behavioral Health, Laboratory and Managed Care sectors fell to their lowest levels in five years over concerns about reimbursement protocols, the new administration's evolving health care reform and a lack of investor enthusiasm in industries faced with financial uncertainty. However, in the "Other Services" category, the contract research organization, or CRO, industry generated a total of 25 deals in 2009, up from 16 deals in 2008. Mr. Monroe noted, "With technology sectors such as Pharmaceuticals and Medical Devices leading the health care M&A market, other industries that directly service these sectors, such as CROs, stand ready to attract M&A dollars." Mr. Steever added, "With the recent passage of health care reform, and the addition of up to 30 million customers to the health insurance rolls, investors will very likely use mergers and acquisitions to capture that increased market share in the near future. Targeted sectors will most likely include Hospitals, Managed Care and retail-oriented health care providers."
The Health Care Acquisition Report, Sixteenth Edition, contains nearly 200 pages of hard-to-find information on all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health, rehabilitation and other services mergers and acquisitions in 2009. Two other services sectors, long-term care and home health and hospice care, are treated separately in The Senior Care Acquisition Report, Fifteenth Edition. Irving Levin Associates, Inc. is a Norwalk, Connecticut-based research and publishing firm specializing in health care investments. The firm has more than 50 years experience in the health care and seniors housing acquisition market. The Health Care Acquisition Report, Sixteenth Edition, may be purchased for $595 by calling 800-248-1668 or clicking here.