Fourth Quarter Caps off a Record Year

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
800-248-1668
Fax: 203-846-8300
pressreleases@levinassociates.com
Fourth Quarter 2004 Caps Off A Record Year In Health Care M&A, According To New Report From Irving Levin Associates, Inc.
NEW CANAAN, CT – January 7, 2004 – During the fourth quarter of 2004, merger and acquisition volume in the health care industry fell just 3% from the previous quarter and 9% from the year–ago quarter, Q4:03. The contribution of each sector to this market is noted in the chart below.  The real story, however, lies in the prices paid to make these deals. Based on revealed prices, a total of $50.6 billion was spent to finance Q4:04’s 211 transactions. This amount represents a 138% increase from the $21.3 billion committed to fund health care M&A in Q3:04, and a 13% increase over the $44.7 billion spent in Q4:03.

The Health Care M&A Market Q4:04 Deal Volume By Sector  
Sector
Q4:04
Deals*
Q3:04
Deals
%Change
Q4:03
Deals
%Change
Services:

 

 

Long-Term Care
25
26
-4%
25
0%
Hospitals
16
17
-6%
10
+60%
Laboratories, MRI, Dialysis
10
9
+11%
9
+11%
Managed Care
8
11
-27%
7
+14%
Physician Medical Groups
8
4
+100%
10
-20%
Home Health
7
8
-13%
3
+133%
Behavioral Health
1
7
-86%
4
-75%
Rehabilitation
1
3
-67%
4
-75%
Other
29
27
+7%
29
0%
Services Subtotal
105
112
-6%
101
+4%

Technology:

 

 

Pharmaceuticals
39
48
-19%
49
-20%
Medical Devices
32
30
+7%
42
-24%
Biotechnology
22
15
+47%
27
-19%
e-Health
13
13
0%
14
-7%
Technology Subtotal
106
106
0%
132
-20%

 

 


Grand Total
211
218
-3%
233
-9%
*Preliminary figures
 Long-Term Care continued to lead the services segment, picking up steam during the latter half of 2004. “Just as distressed properties were disappearing from the market, quality properties and portfolios emerged during the past two quarters to take their place,” stated Stephen M. Monroe, managing editor at Irving Levin Associates, Inc. “With capital flowing back into the market and cap rates declining, some of the prices paid were the richest we have seen in five years.
Though the Pharmaceutical sector generated the greatest deal volume in Q4:04, Medical Devices topped the list in prices paid. A combined total of $29.5 billion, or 58% of the $50.6 billion spent on all of health care in Q4:04, was committed to fund 32 deals in Medical Devices. “In a year packed with billion-dollar deals, the fourth quarter posted eight, three of them in the Medical Devices sector alone,” observed Sanford Steever, Ph.D., editor of the Report. “The push to achieve dominance in certain promising technologies, such as drug-coated stents, will continue to drive dealmaking in this sector in the coming year.
The fourth quarter accounted for 2% of the year’s 867 deals, and 26% of the $191 billion committed to finance that activity. As the chart below shows, it caps off the single richest year in the past five.
Year
Deal Volume
Dollars Committed
2004
867
$191.0 billion
2003
928
$93.8 billion
2002
948
$97.9 billion
2001
817
$74.5 billion
2000*
725
$125.4 billion
*Data incomplete for Health Care Technology Segment
“While the current situation has much to be optimistic about in the near term, the M&A market may take a breather for companies to integrate acquisitions and investors to consolidate gains,” commented Mr. Monroe. For more information on The Health Care M&A Report, or for a subscription to any Irving Levin publication, call 800-248-1668.  Irving Levin Associates, Inc., established in 1948, has headquarters in New Canaan, 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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