Most Active Sector In Health Care M&A For 2011
No single sector of the health care industry has been as active in the M&A market this year as Medical Devices. It leads the other sectors in terms of both deal and dollar volume. For the first nine months of 2011, the sector has posted 130 deals, or 18% of the 704 transactions in all of health care. Those 130 deals are worth $58.8 billion, or nearly 32% of the total amount spent on health care M&A.
Part of the sector’s success may be attributed to the fact that it has posted several mega-deals this year. The first nine months of the year have seen 25 billion-dollar deals in the health care industry worth a total of $126.0 billion; the Medical Device sector accounted for nine of them worth $48.2 billion. The top three deals illustrate the level and scope of this activity: Johnson & Johnson (NYSE: JNJ) has offered $21.3 billion for Synthes (SWX: SYST), Danaher (NYSE: DHR) has offered $6.8 billion for Beckman Coulter (NYSE: BEC) and Apax Partners has offered $6.3 billion for Kinetic Concepts (NYSE: KCI).
But this begs the question of what factors explain such figures. First is the availability of capital. Strategic buyers have strong balance sheets and financial buyers have equally healthy war chests. And with interest rates low, they want to put these idle funds to work. While growth through innovation strategies, such as investing in R&D efforts and buying early-stage, VC-backed companies, would have captured a fair portion of this capital in the past, recent concerns over a longer, more challenging regulatory approval process have turned into a disincentive to follow this well-trod path. Instead, many buyers are now more focused on acquiring firms in later stages of development (usually in mid-stage clinical trials) if not outright mature companies with established revenue streams to their credit.
September’s merger and acquisition activity provides a microcosm of what has been happening in the Medical Device industry over the past several quarters. The market includes strategic and financial buyers and sellers, as well as target companies of all different shapes and sizes. In September’s largest Medical Device deal, Bausch + Lomb (NYSE: BOL) has acquired an option to buy Technolas Perfect Vision (TPV) for a price of $625.2 million. Based in Munich, Germany, TPV was established in 2009 through a joint venture between BOL and 20/10 Perfect Vision AG to develop advanced refractive and cataract technologies. BOL will use this deal as a vehicle to further its fematosecond laser platform.
In the life sciences space, PerkinElmer (NYSE: PKI) is acquiring smaller rival Caliper Life Sciences (NASDAQ: CALP) for $600.0 million. Under terms of the deal, PKI plans to offer CALP shareholders $10.50 per share in cash, for a 42% premium to the stock’s prior-day price. This transaction, which is valued at 4.3x revenue, gives the buyer a new, complementary set of molecular imaging and detection technologies…Want to read more? Click here for a free trial to The Health Care M&A Monthly and download the current issue today