Over $1.0 Billion Spent Each Day On M&A

February’s headlines reported variously on state senators who wouldn’t return to the Capitol in Madison, a dictator who wouldn’t leave his Capitol in Tripoli and drug-fuelled celebrity rants (take your pick), but none of them focused on the astounding and positive news right under their noses.  The health care merger and acquisition market was ablaze with activity, posting a total of 60 deals worth $32.0 billion. Or, to look at it another way, the market spent over $1.0 billion ($1.14 billion, to be precise) each day on health care M&A. If that breathless pace held, the year would break all previous records, with nearly $420.0 billion committed. But the media bears would have none of this bullish news because, as Mark Twain once noted, there’s always a war or famine somewhere to prove their case.
Those who take a calmer, more focused approach will find reasons to be positive in the numbers that the health care industry posted. The nine sectors of the health care services segment posted 37 deals worth $19.4 billion while the four sectors of the corresponding technology segment posted 23 deals worth $12.6 billion. Thus and somewhat unusually, services captured 62% of the deal volume and 61% of the dollar volume.
Among individual sectors Long-Term Care generated the largest dollar volume, $11.975 billion (37%), followed by Medical Devices with $7.0 billion (22%) and Pharmaceuticals with $4.7 billion (15%). Even so, the M&A dollars were spread generously across many sectors: encouragingly, five services sectors posted more than $1.0 billion in deals, and included Long-Term Care, Hospitals, Laboratories, Rehabilitation and “Other.”
To be sure, February’s activity contains a number of aberrations from recent trends in health care M&A. More deals were announced in the services segment than in technology. The services segment attracted greater dollar volume than technology did. Long-Term Care posted greater dollar volume in a single month than it did in any of the five preceding quarters. These indicators suggest that February’s exuberance may well represent a departure from recent, more gradual trends in the M&A market, so we will not be surprised when the market pulls back from this pace later on. But the activity, investor interest and dollars being put to work are real enough. The long-term prospects for M&A in the health care industry remain strong because the underlying reasons for consolidation remain in place: a fragmented delivery system, an aging population and skyrocketing costs, to name a few…Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today