In the October 2007
issue:
Private Equity’s Role In M&A--
What Is The Impact Of Private Equity On The Market?
Speculation has suggested that the crisis in
the credit market will hobble private equity’s ability to pursue LBOs and
privatizations, and shut down dealmaking.
Read the issue to see the part that private equity has played in the health
care M&A market.
...
August’s Health
Care M&A Market--
Eighty-Two Deals Announced Worth $7.2 Billion
August saw 82 deals announced
in the health care industry worth a combined total of $7.2 billion.
Is the drop in dollar volume the result of the credit crisis or just a
seasonal phenomenon?
...
In the Departments
Services
-Health Care Services
-Deal Summaries
-Additional Transactions
Technology
-Health Care
Technology
-Deal Summaries
-Additional
Transactions
-Transaction Updates
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Read more about
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Articles Archive
Companies Mentioned in this issue:
September 2007
A
Advanced Bionics Corp. p12
Ajinomoto Co. p12
AkaRx p10
Amedisys p4
Apax Partners, LP p4
Apollo Health Street p10
Apollo Hospitals p10
Applera p11
Applied Biosystems Group p11
Ark Holdings, Inc. p8
Ascension Health p8
B
Baptist Memorial Health Care Corp. p7
Bayer p10
Bayside Marin Recovery Center p4
Behrman Capital p8
Biosite p12
Boston Scientific p12
Bradley Pharmaceuticals p16
Bristol-Myers Squibb p12
Brown & Toland p10
C
Cain Brothers p10
Caritas Christi Health Care p8
Catholic Health Initiatives p8
Celera Group p11
Cholestech p12
CIBC p11
Colony Capital p8
Community Health Systems p7
Covington & Associates p11
CRC Health Corporation p4
D
Deutsche Bank Securities p16
Dimensions Healthcare System p8
Doctors Community Healthcare Corp. p4
Dr. Reddy’s Laboratories p16
Dresdner Kleinwort p16
E
Ecolab p11
Emergis p11
Encompass Home Health p4
Entelos p10
Envision Health Corp. p4
F
Firstsource Solutions p10
Forum Bioscience p12
G
Gilead Sciences p12
Goldman Sachs p4
Goldman Sachs Credit Partners L.P. p9
Greater Southeast Community Hospital p4
Guidant Corp. p12
H
Harris Williams & Co. p4
HCA p3
HealthSpring p8
HemoSense p11
Hirslanden AG p8
I
Icagen p12
Iconix Biosciences p10
Informatqiue Demers Lambert Desrocher p11
IntegraMed America p9
IntegriCare p4
Inverness Medical Innovations p10
J
JJWild p11
Johnson & Johnson p12
K
Kindred Healthcare p8
L
Leon Medical Centers p8
Leon Medical Centers Health Plans p8
M
MAKIZ p12
Manor Care p3
Marcus & Millichap p8
Matritech p11
MedAssist Holding p10
Medco Health Solutions p10
Medi-Clinic Corporation p8
Metropolitan Dental Holdings p10
MGI Pharma p10
Microtek Medical p11
Morgan Stanley p8
N
Nektar Therapeutics p10
Northeast Arkansas Clinic p7
Northeast Arkansas Medical Center p7
Novartis p16
P
Parion Sciences p12
Perot Systems Corp. p11
Pfizer p12
PolyMedica Corporation p10
Pramerica Real Estate Investors p8
Presbyterian Hospital p7
Providence Hospital p8
R
Ranbaxy Laboratories p16
Rockdale Medical Center p4
RoundTable Capital Partners p10
S
Sentinel Capital Partners p10
Signature Hospital Corp. p4
Specialty Hospitals of America p4
Stada Arzneimittel p12
Sunrise Senior Living p8
Sutter Health p10
T
Tandem Health Care p8
Texas Health Resources p7
The Greens Adult Living Communities p8
Thoma Cressey Bravo p4
Toyama Chemical p12
Triad Hospitals p7
V
Vein Clinics of America p9
W
Wyeth p16
Z
ZAO Biodyne Pharmaceuticals p12
ZAO MAKIZ-Pharma p12
ZAO Skopinpharma p12
Zavata p10
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Private Equity’s Role In M&A--
What Is The Impact Of Private Equity On The Market?
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article to a friend
Email Editor
The summer doldrums, compounded
by the recent credit crunch, set the stage for a fair amount of
speculation about the M&A market. Hard news was scarce in August, so many
articles we read indulged themselves in wondering who might buy whom next
and even whether the M&A market would continue or collapse. This latter
question, it seems to us, stems largely from a belief that the seizing up
of the credit markets will prevent private equity firms from pursuing
leveraged buyouts and privatizations and, in so doing, effectively
eliminate one of the major drivers of the M&A market. We believe this
interpretation fails to accurately assess the role private equity, however
glamorous it may appear, has played in health care M&A activity.
The table on page 3 of this month's
issue reveals that from 2002 to the present, private equity groups, as
buyers, have never accounted for more than 5% of deal volume in the health
care M&A market. It also shows that in only two of the past six years has
private equity accounted for more than 10% of the annual dollar volume. In
2006 and 2007 (year to date), private equity accounts for 18.5% and 16.9%,
respectively. A few high profile deals, such as HCA’s $33.0 billion
privatization by a consortium of PEGs in 2006, are clearly responsible for
the recent spike in private equity’s share of dollar volume. The remainder
of the buyers, at least 80% in any given year, are strategic buyers, with
a sprinkling of other financial buyers, such as REITs in the Long-Term
Care sector.
The table on page 8 of the September
issue shows which sectors private equity dollars have been flowing to
in recent years. With the lone exception of 2004, health care services
sectors captured the majority of PE dollars committed in any given year.
The same holds true for deal volume, as well; the health care services
segment accounts for the majority of transactions announced in each year
except for 2002. One reason for the disparity between PE interest in
services over technology may lie in the fact that certain sectors, such as
Hospitals and Long-Term Care, have real estate assets that can be
separated from the business operations of an acquired company and
subsequently leveraged to finance the original deal (think HCA, think
Manor Care). In both the technology and services segments, individual
assets or discrete units can naturally be sold off to the same end.
The chart on page 9 of this month's
issue tabulates the kinds of companies PE buyers targeted in terms of
their status as publicly traded or privately held. The clear trend to
emerge from the chart is that, with the exception of 2003, the majority of
private equity dollars were focused on recapitalizing and privatizing
publicly traded corporations. So far, shareholders have been willing to
oblige these buyers as long as they could get their 20% acquisition
premium. The top portion of the chart divides private targets into those
sold by other PE firms and those sold by strategic sellers. While the
strategic sellers in this cohort have tended to account for the majority
of deal volume in any given year, since 2004 it is PE “flippers” who have
dominated in terms of dollar volume.
Private equity deals may have had a psychological impact on the M&A market
because they tend to be large, splashy and well-covered in the media,
often with attempts to conjure the robber barons of old. But such
anecdotal accounts appear neither to jibe with the figures nor to
recognize the strong fundamentals in private equity, as detailed in our
July and August 2007 issues. As we see it, private equity will continue to
access the merger and acquisition market as a means of discovering and
unleashing untapped value in companies.
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