Health Care M&A Makes a Strong Showing in First Quarter 2011, According to a 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
NORWALK, CT – April 19, 2011 – During the first quarter of 2011 and based on revealed prices, a total of $54.4 billion was spent to finance mergers and acquisitions in the health care industry, up 65% from the $32.9 billion spent in the first quarter of 2010. However, deal volume slipped somewhat during the same period, with a 16% decrease in transactions from the fourth quarter of 2010 and an 8% dip from the year-ago quarter, Q1:10. By annualizing the first quarter 2011 dollar figure, we project that nearly $220.0 billion will be spent in 2011 for M&A activity in the health care industry.
 
The Health Care M&A Market First Quarter 2011
Dollar Amounts By Sector*

Sector

Dollar Amount

First Quarter 2011

Percent of  Quarter

Pharmaceuticals

$  13,497,800,000

24%

Medical Devices

11,694,000,000

21%

Biotechnology

6,722,700,000

12%

E-Health

182,800,000

>1%

   Technology subtotal

$  31,097,300,000

57%

 

 

 

Long-Term Care

$  12,596,800,000

23%

Laboratories, MRI & Dialysis

2,533,200,000

5%

Hospitals

1,927,300,000

4%

Rehabilitation

1,304,800,000

2%

Home Health

58,000,000

>1%

Behavioral Health

28,000,000

>1%

Physician Medical Groups

14,600,000

>1%

Managed Care

—

—

Other Services

4,893,200,000

9%

Services subtotal

$  23,355,900,000

43%

 

 

 

Total health care

$  54,453,200,000

100%

*Preliminary figures
          The Health Care M&A Market Q1:11 – Deal Volume By Sector

                                                       

                                                     Q1:11       Q4:10         %       Q1:10        %

Sector                                          Deals*       Deals    Change   Deals    Change

Services Segment:

Long-Term Care                              27              35       -23%          20        35%

Physician Groups                              18              29       -38%          12        50%

Hospitals                                          23              24         -4%            9      156%

Home Health Care                              5                7       -29%          14       -64%

Labs, MRI, Dialysis                          11                7         57%            8        38%

Rehabilitation                                      2                5       -60%            2          0%

Behavioral Health Care                       4                2       100%            0      NM

Managed Care                                   1                1           0%            2       -50%

Other                                               26              24           8%          26          0%

   Services Subtotal                         117            134       -13%          93        26%

                                                                                                                       

Technology Segment:                                                                                   

Medical Devices                               37              42       -12%          41       -10%

Pharmaceuticals                                20              27       -26%          39       -49%

Biotechnology                                   23              26       -12%          30       -23%

e-Health                                           12              19       -37%          23       -48%

   Technology Subtotal                      92            114       -19%        133       -31%

                                                                                                                       

Grand Total                                  209            248        -16%       226         -8%

*Preliminary figures
The search for new drugs to treat the elderly and housing facilities to take care of them propelled M&A activity in the two busiest sectors during the quarter, Pharmaceuticals and Long-Term Care. “As patent cliffs loom, pharmaceutical companies are paying up to acquire promising drug candidates in clinical trials that have been developed by biotech companies. Buyers are banking on the novelty of these drugs and their difficulty of replication to restore revenues that are being lost to generic copy-cat drugs,” observed Sanford Steever, editor of The Health Care M&A Report. “With renewed sources of capital and novel ways to structure their investments at their disposal, buyers of seniors housing facilities have increased their portfolios so they can accommodate the influx of residents and their health care needs as the population continues to age and retire. The real estate investment trusts have been particularly active in Long-Term Care M&A,” noted Stephen M. Monroe, managing editor at Irving Levin Associates, Inc., which publishes the Report.
 
Recent health care reform has had an impact on M&A activity in other individual sectors of the health care industry. The acquisition of Physician Medical Groups by Hospitals has increased as providers attempt to build the accountable care organizations proposed in the legislation while acquisition activity in the Managed Care sector continues to lag due to remaining uncertainties over reimbursement issues and the durability of reform. “While government reform has shown its ability to influence mergers and acquisitions in the health care industry,” noted Mr. Steever, “the market continues to respond to fundamental forces such as the consolidation of fragmented providers, the containment of exploding health care costs and the need to better integrate different facets of the health care delivery system. Policy makers may debate, but the M&A market continues to reshape the health care landscape.”
 
For more information on The Health Care M&A Report, or for a subscription to any Irving Levin publications, 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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