The Health Care M&A Monthly

In the September 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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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

 

August’s Health Care M&A Market--
Eighty-Two Deals Announced Worth $7.2 Billion

Email Editor

A total of 82 mergers and acquisi-
tions were announced in the
health care industry during August 2007. This represents an 8.9% decrease from the 90 deals announced in the prior month and a 5% decrease from the 86 deals announced in August 2006.

The four sectors of the technology segment garnered 43 deals, or 52% of the month’s total deal volume, while the nine sectors of the services segment accounted for the remaining 39 deals. The Medical Device sector posted 17 deals and was followed by Pharmaceuticals with 13 and Long-Term Care with nine. Together these three sectors accounted for 48% of all health care M&A deals.

Based on revealed prices, a total of $7.2 billion was committed to fund August’s health care M&A activity. Of that amount, the services segment captured $4.1 billion, or 57% of the month’s total, while technology segment accounted for the remaining $3.1 billion.

By itself, the Pharmaceutical sector attracted the greatest amount of capital of any single sector, $1.7 billion, followed by Pharmacy Benefits Managers (a subsector of “Other”) with $1.5 billion and by Long-Term Care with $1.4 billion.

August saw three billion-dollar deals worth a combined total of $3.6 billion, or half of the month’s total dollar value. These transactions were in the Pharmacy Benefits Manager ($1.5 billion), Long-Term Care ($1.1 billion) and Pharmaceutical ($1.0 billion) sectors.

In three transactions, worth an estimated $750.0 million, or just over 10% of the month’s total M&A dollars, the buyers were private equity firms. Four deals, worth approximately $650.0 million were initiated by private equity firms as sellers. Virtually all remaining buyers and sellers in the August market were strategic.

Credit Crunch Or Summer Vacation?

If you’ve been focusing on the credit crunch stemming from the subprime mortgage market meltdown, you might be alarmed that August’s lower dollar value, as compared with July’s, is a signal that this crisis was metastasizing into the M&A market. We believe, however, that this is not the correct comparison to make. As the table on page 2 of this month's issue shows, August’s dollar volume traditionally drops off more than 60% from July’s level, suggesting as much as anything else that bankers, brokers and dealmakers are taking their summer vacations. Those left manning their desks are typically engaged in tying up existing deals in time for the Labor Day weekend.

While the credit crisis is probably contributing something to the drop in dollar volume from July to August, we believe this historical comparison shows that its influence is not as dire as suggested just by looking at this year’s figures in isolation. The true impact of the subprime mess will probably be known only after some months and after lenders have readjusted their criteria.

The Longer View

What we are seeing now is the absence of very large deals in the market. Part of this is likely due to a decrease in the availability of debt financing due to the credit crunch, but basic valuation issues remain a major factor. Until the stock market corrects and stabilizes, buyers will prudently hold off making deals so they don’t overpay for a publicly traded corporation whose share price may stand to lose a few more percentage points. It’s just a simple matter of balancing “sell high,” which we have seen plenty of this year, with the corresponding “buy low.” The mindset now prevailing seems to be one of wait and see who will jump back in the water first.

Taking the longer view, from January through August, there have been 645 deals (2006, 694) worth $166.7 billion (2006, $153.7 billion). Even if the M&A market stopped dead in its tracks four months short of December, 2007 would still be the second-largest year ever in terms of health care M&A dollars committed, after the record $267.1 billion committed in all of 2006. Year to date, 2007 already surpasses both the $162.2 billion posted in full-year 2005 and the $164.3 billion recorded in full-year 2004. Figures like these suggest a robust underlying M&A market and go a long way towards explaining why we don’t subscribe to Chicken Little’s belief in its imminent demise.

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