Health Care M&A Accelerates In Second Quarter After Passage of Reform According to New Report by 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
NORWALK, CT – July 28, 2010 – According to a new Report from Irving Levin Associates, a total of 233 mergers and acquisitions were announced in the health care industry during the second quarter of 2010, up 7% from the 218 deals announced in the prior quarter. A total of $46.3 billion was committed to fund this M&A activity, up 41% from the $32.8 billion spent in the previous quarter and up 62% from the $28.5 billion spent in the year-ago quarter, Q2:09.

The Health Care M&A Market Second Quarter 2010
Dollar Amounts By Sector*

Sector

Dollar Amount

Second Quarter 2010

Percent of  Quarter

Biotechnology

     $  15,700,000,000

34%

Pharmaceuticals

       12,500,000,000

27%

Medical Devices

     5,000,000,000

11%

e-Health

2,400,000,000

5%

   Technology subtotal

$  35,600,000,000 

77%

 

 

 

Behavioral Health Care

$    3,100,000,000

7%

Home Health Care

         1,300,000,000

3%

Hospitals

     950,500,000

2%

Labs, MRI, Dialysis

709,200,000

1%

Long-Term Care

         420,700,000

>1%

Physician Medical Groups

1,000,000

>1%

Rehabilitation

—

—

Other Services

    4,200,000,000

9%

   Services subtotal

$   10,681,400,000

23%

 

 

 

Total health care

$ 46,281,400,000

100%

                                 *Preliminary figures     

  The increase in both deal and dollar volume over the previous quarter may be ascribed in part to the passage of health care reform in March, which has allowed companies to make better projections of their revenues and deal makers to negotiate more realistic valuations for companies involved in mergers and acquisitions.
 
The number of deals announced in each sector of the health care industry appears in the table below, along with comparisons to the prior quarter (Q1:10) and the year-ago quarter (Q2:09).
 
             The Health Care M&A Market Q2:10 – Deal Volume By Sector

    

                                                     Q2:10       Q1:10         %       Q2:09        %

Sector                                          Deals*       Deals    Change   Deals    Change

Services Segment:

Long-Term Care                              26              16         63%          13      100%

Hospitals                                          20                7       186%          16        25%

Labs, MRI, Dialysis                          15                8         88%            5      200%

Home Health Care                            11              14       -21%          15       -27%

Physician Groups                                9              12       -25%          10       -10%

Behavioral Health Care                       4                0       NA               0      NA

Rehabilitation                                      4                2       100%            2      100%

Managed Care                                   3                2         50%            4       -25%

Other                                               19              26       -27%          23       -17%

   Services Subtotal                         111              87         28%          88        26%

                                                                                                                       

Technology Segment:                                                                                   

Medical Devices                               43              40           8%          50       -14%

Pharmaceuticals                                43              39         10%          34        26%

Biotechnology                                   25              30       -17%          45       -44%

e-Health                                           11              22       -50%          19       -42%

   Technology Subtotal                    122            130         -6%        148       -18%

                                                                                                                       

Grand Total                                  233            218           7%       236         -1%

      *Preliminary figures

Several services sectors that depend on government reimbursement saw deal volume increase over the first quarter’s levels. Sanford Steever, Ph.D., editor of The Health Care M&A Report observed, “With a new regulatory landscape coming into sharper focus, providers who rely on Medicare are better able to determine what their cash flow will be going forward. This will in turn help them decide whether to pack up their business and sell or to expand through acquisitions.” Some services sectors are being immediately impacted by the recently enacted legislation. “Hospitals have responded with a 186% increase, quarter over quarter, in merger and acquisition activity, in the hopes of capturing their fair share of the 32 million previously uninsured patients” continued Mr. Steever.
 

While Medical Technology sectors such as Pharmaceuticals and Medical Devices continue to see the greatest amount of dollar volume in the health care merger and acquisition market, the services sectors are now capturing an increasing share of the overall activity. “The first six months of 2010 saw $16.6 billion spent on M&A activity in the health care services sectors, which already exceeds the $12.4 billion spent on the same sectors in all of 2009,” stated Stephen M. Monroe, managing editor at Irving Levin Associates. “Strategic and financial buyers alike are finding attractive acquisition opportunities, particularly in the middle market for health care services,” explained Mr. Monroe.
 
The first half of 2010 registered a total of 453 deals in the health care industry with a combined value of $79.1 billion. “If common wisdom holds, and the second half of the year performs better than the first, then 2010 is on track to generate over 900 deals worth between $165.0 billion and $175.0 billion,” stated Mr. Steever. “While not a record-breaker, 2010 could rank as the fifth most active year in the past decade for M&A, well ahead of the recession-plagued years of 2001-03,” Mr. Steever concluded.
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 databases, on the health care and senior housing markets.

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