Health Care M&A Activity in Q1 2014 Softens Compared with Q4 2013, According to The Health Care M&A Report

IMMEDIATE RELEASE  
Lisa E. Phillips, Editor
Stephen M. Monroe, Partner
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NORWALK, CT – April 22, 2014 – Health care merger and acquisition activity was a little soft in the first quarter of 2014. Deal volume was down 14% versus the previous quarter, with 239 deals announced. However, the most recent quarter bested the same quarter a year ago, by nearly 13%, when only 212 deals were announced, according to The Health Care M&A Report. Deal value actually improved compared with Q4:13. The early total for M&A activity in the first quarter is $49.6 billion, up 11% compared with Q4:13. Compared with the first quarter of 2013, when buyers committed just $15.6 billion, deal value jumped 217%.

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

  Q1:14 Q4:13   Q1:13  
Sector
Services
Deals Deals %
Changed
Deals

%
Changed

Behavioral Health Care 3 2 50% 7 -57.1%
Home Health & Hospice 6 10 -40% 9 -33.3%
Hospitals 12 17 -29.4% 21 -42.9%
Laboratories, MRI & Dialysis 11 9 22.2% 9 22.2%
Long-Term Care 60 65 -7.7% 44 36.4%
Managed Care 5 4 25% 2 150%
Physician Medical Groups 10 20 -50% 13 -23.1%
Rehabilitation 2 6 -66.7% 2 0.0%
Other 27 15 80% 24 12.5%
     Services subtotal 136 148 -8.1% 131 3.8%
Technology          
Biotechnology 26 30 -13.3% 12 116.7%
eHealth 19 24 -20.8% 16 18.8%
Medical Devices 25 30 -16.7% 25 0.0%
Pharmaceuticals 33 46 -28.3% 28 17.9%
      Technology subtotal 103 130 -20.8% 81 27.2%
Grand Total 239 278 -14% 212 12.7%

Source: The Health Care M&A Report, April 2014
 

Deal making in the Services sector was down 8.1%, at 136 deals, compared with the previous quarter, but was slightly better than the year-ago first quarter, which had 131 deals. Measured by total dollar volume, the Services side had a combined total of $12.4 billion in Q1:14, down 28% compared with Q4:13 ($17.3 billion) but 120% higher than the $5.6 billion total in Q1:13 (just $5.6 billion).

Some trends that emerged in 2013 continued into the first quarter, on the Services side. The Long-Term Care sector, which is usually most active in the fourth quarter, almost equaled its record performance of 65 deals in Q4:13, with 60 deals announced in Q1:14. That’s a torrid pace compared with the year-ago first quarter, in which only 44 deals were recorded. Hospital deals were decidedly slower in Q1:14, however, with only 12 transactions, down 29.4% compared with the previous quarter, and even lower than the same period the year before, down nearly 43%. In the Other Services segment, we continued to see strong M&A activity around clinical research organizations (CROs), both national and global in scope. They helped boost that category to 27 deals in the first quarter, up 80% compared with Q4:13.

The Technology sector saw weakened deal activity compared with the fourth quarter of 2013, down nearly 21% at just 103 deals. Even that slower performance was better than the year-ago quarter by 27.2%, which had only 81 deals. Spending was another story, with $37.2 billion committed, up 36% versus Q4:13 ($27.4 billion) and 272% better than the first quarter a year earlier (just $10 billion).

Some trends that took shape in 2013 were still playing out on the Technology side. In 2013, the Pharmaceuticals sector did not see any mega-billion-dollar deals, but activity stayed strong. The equity markets were rewarding acquirers despite ever-rising valuations for generic drug makers and specialty pharmaceutical companies. Activity cooled a bit in the first quarter, as acquirers took stock and potential sellers began preparing books for the coming quarters. Similarly, the Biotechnology category enjoyed a busy Q1:14, only slightly behind its performance in Q4:13 (26 and 30 deals, respectively), but more than double the number of deals in the year ago quarter. However, the IPO market is not as hot for biotechnology companies so far this year, and that sentiment may spill over into the M&A side. 

“Health care merger and acquisition activity has recovered from the lull it saw in the first quarter of 2013. The equity markets are performing even stronger than last year, and the implementation of the Affordable Care Act didn’t slow deal-making in some sectors,” said Lisa E. Phillips, editor of The Health Care M&A Report. “With that uncertainty gone, we expect to see a couple of busy quarters ahead.”

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.