Health Care M&A Spending Softens in Q3 2013 as Deal Volume Grows, According to Health Care M&A News

FOR IMMEDIATE RELEASE  
Lisa E. Phillips, Editor
Stephen M. Monroe, Partner
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NORWALK, CT – October 23, 2013 – Health care merger and acquisition activity picked up in the third quarter of 2013, compared with the second quarter. Deal volume was up nearly 16% versus the previous quarter, with 267 deals announced. This year’s third quarter also outperformed the same quarter a year ago, up almost 20%, according to Health Care M&A News.

                        The Health Care M&A Market – Deal Volume by Sector

  Q3:13 Q2:13   Q3:12  
Sector
Services
Deals Deals %
Changed
Deals

%
Changed

Behavioral Health Care 2 5 -60% 3 -33.3%
Home Health & Hospice 5 10 -50% 9 -44.4%
Hospitals 24 20 20% 18 33.3%
Laboratories, MRI & Dialysis 8 10 -20% 21 -61.9%
Long-Term Care 59 54 9.3% 50 18.0%
Managed Care 4 3 33% 7 -42.9%
Physician Medical Groups 16 17 -5.9% 6 166.7%
Rehabilitation 4 3 33.3% 3 33.3%
Other 38 29 31% 24 58.3%
     Services subtotal 160 151 6% 141 13.5%
Technology          
Biotechnology 25 16 56.3% 20 25%
eHealth 16 8 100% 26 -38.5%
Medical Devices 23 25 -8.0% 19 21.2%
Pharmaceuticals 43 31 38.7% 17 152.9%
      Technology subtotal 107 80 33.8% 82 30.5%
Grand Total 267 231 15.6% 223 19.7%

Source: Health Care M&A News, October 2013
 

However, deal value was down slightly compared with the previous quarter. The preliminary total for M&A activity in the third quarter is $50.8 billion, down 4.2% compared with the $53.0 billion spent in Q2:13. Deal value actually increased by 35.1% compared with the third quarter of 2012, when buyers committed just $37.6 billion.

Five sectors posted declines in the number of deals announced, compared with the previous quarter: Behavioral Health Care (-60%), Home Health & Hospice (-50%), Labs, MRI & Dialysis (-20%), Physician Medical Groups (-6%) and Medical Devices (-8%). Two of those sectors—Behavioral Health Care and Home Health & Hospice—do not post significant numbers of deals, so their results typically show wide swings from quarter to quarter.

The health care services sector still managed to post a 6% gain over Q2:13, with 160 deals announced, and showed a healthy 13.5% increase versus Q3:12. The health care technology sector also posted gains, with 107 deals announced in the third quarter, up 34% compared with the previous quarter and 31% over the year-ago quarter. eHealth deals staged a comeback (+100%), although from a very small base, while Biotechnology (56%) and Pharmaceuticals (39%) showed even stronger performance than the previous quarter.

“Deal-making momentum is growing, after a very low level of activity,” said Lisa E. Phillips, editor of Health Care M&A News. “The Long-Term Care and Hospital sectors were even stronger than in the second quarter, and compared with the third quarter in 2012. Biotechnology and Pharmaceuticals are still going strong, and we expect that to continue—at least until the major drug makers feel their pipelines are full again.”

Hospital deals were the attention-getters in Q3:13, with Community Health System’s $7.6 billion bid for Health Management Associates coming on the heels of the Tenet Healthcare Corporation’s $4.3 billion acquisition of Vanguard Health Systems in Q2:13. Transactions of that size aren’t likely to be repeated in the near future, but deal volume in the sector will probably remain elevated as more standalone hospitals seek to join larger health systems in order to remain viable.
“We expect to see even more M&A activity in the fourth quarter,” Ms. Phillips said. “Now that the Affordable Care Act is poised to take full effect in January, the uncertainty felt in many sectors is starting to dissipate. Health systems that have made strategic acquisitions such as physician medical groups will now turn their attention to long-term care, home health care and rehabilitation to fill out their care continuum requirements. We still expect a fluid market in Physician Medical Groups and continued consolidation among hospitals.”

For more information on The Health Care M&A Information Source or Health Care M&A News, or for a membership to any of Irving Levin Associates’ subscriptions, please 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.