During the fourth quarter of 2004, a total of 213 deals were announced in the 13 sectors of the health care industry. The contribution of each sector to the total appears below.
As throughout the entire year, the Long-Term Care sector lead the health care services segment in deal volume while the Pharmaceuticals sector led the corresponding technology segment.
While maintaining its lead pace in deal volume, the Long-Term Care sector underwent a fundamental shift: Just as distressed properties were disappearing from the market during the second half of 2004, quality properties and portfolios emerged to take their place. With capital flowing back into the senior care market and cap rates declining, some of the prices paid were the richest we have seen in five years.
The top three sectors in deal volume for Q4:04, Pharmaceuticals (39), Medical Devices (32) and Long-Term Care (27), together accounted for 98 deals, or 46% of the quarter’s total M&A activity.
The fourth quarter’s 213 deals represent just a 2% decline from the 218 transactions announced in the previous quarter and a 9% decline from the 233 deals posted in the year-ago quarter, Q4:03.
What They Paid
The real story, as always, lies in the prices paid to make these deals. Based on information revealed to date, a total of $50.7 billion was committed to finance the fourth quarter’s 213 transactions. This figure represents a 138% increase from the $21.3 billion that was committed to fund health care M&A in Q3:04, and a 13% increase over the $44.7 billion spent in Q4:03.
The dollar amounts committed in each sector are listed in the table above, while their percentage contribution to the total is plotted in the chart opposite.
Medical Devices tops the list in terms of price paid. In a year that was packed with billion-dollar deals, the fourth quarter posted eight, three of them in the Medical Device sector alone. A combined total of $29.5 billion, or 58% of the $50.7 billion spent on all of health care in Q4:04, was committed to fund the 32 deals in Medical Devices.
Taken together, the Medical Device and Pharmaceutical sectors accounted for 76% of the quarter’s total. Adding in Biotechnology and e-Health, the health care technology segment attracted just short of 80% of all dollars committed to finance the quarter’s M&A activity.
The Fourth Quarter’s Place in 2004
The amount paid in Q4:04 represents 27% of the $191.3 billion committed during all of 2004 to finance the year’s 871 transactions. The quarter’s deal volume accounts for 24% of the year’s total. Thus, Q4:04 accounted for roughly one-quarter of the year’s M&A activity.