Health Care Services M&A Rebounds Strongly in 2010, According to 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 – March 31, 2011 - Merger and acquisition activity in the health care industry’s service sectors burgeoned in 2010 as the impact of Credit Crunch and Great Recession on the economy began to fade. A total of 458 M&A deals were announced in nine sectors of the health care services industry, up 24 percent from the 368 announced in 2009. Moreover, the dollar volume spent on this M&A activity soared over 425% from $12.3 billion in 2009 to $64.9 billion in 2010. “While the middle market continued to thrive in 2010, we saw a return of the mega-deal with 18 separate billion-dollar transactions announced during the year as compared with just one in 2009. The passage of significant health care reform in March 2010, just one year after the generational market bottom, helped to accelerate the recovery in the markets,” commented Sandy Steever, editor of The Health Care Services Acquisition Report, Seventeenth Edition.
 
The Hospital acquisition market showed marked progress in 2010. Seventy-three M&A transactions were announced in 2010 involving 175 hospitals with 29,294 beds for a combined price of $12.8 billion. (These figures include Community Health System’s $7.3 billion hostile bid for Tenet Healthcare Corporation.) Even without the Community-Tenet deal, 2010 posted a 38 percent increase in the number of hospital deals, a 59 percent increase in the number of hospitals acquired and a 212 percent increase in the dollars spent on hospital transactions. However, certain indicators of hospital pricing fell in 2010 from their levels in 2009; for example, the average price-to-revenue multiple was just 0.66x as compared with 0.78x the previous year. This decrease reflects a higher level of bankruptcy and distressed sales in 2010 with nine such sales as compared with just one in 2009. Stephen M. Monroe, a partner at Irving Levin Associates, commented: “With capital beginning to return to the market, buyers now have the means to take advantage of acquisition opportunities represented by financially distressed sellers. As this market evolves, acquisition pricing will continue to seek its ‘new normal’.”
 
In other highlights, Physician Medical Group merger and acquisition activity rose to its highest level in five years. In 2010, this sector posted 63 deals involving 2,370 physicians for a combined total of $425.4 million. Merger and acquisition deal volume thus increased 54 percent year-over year while dollar volume skyrocketed 330 percent. Mr. Steever observed, “As hospitals and integrated delivery systems attempt to create Accountable Care Organizations, they are building the physician component of these organizations through acquisition. Further, hospital-based physician practices stand to prosper more than freestanding practices in the emerging reimbursement environment, prompting physicians to join forces with acute care providers.”
 
The Health Care Services Acquisition Report, Seventeenth Edition, contains nearly 200 pages of hard-to-find information on all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health, home health and hospice care, rehabilitation and other services mergers and acquisitions in 2010.  One other services sector, long-term care, is treated separately in The Senior Care Acquisition Report, Sixteenth 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 Services Acquisition Report, Seventeeth Edition, may be purchased for $595 by calling 800-248-1668 or logging in at https://www.levinassociates.com/har17order

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