FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Despite First Quarter Decline, Health Care M&A Remains Robust, According to New Report From Irving Levin Associates, Inc.
NORWALK, CT – April 15, 2008 – According to a new Report from Irving Levin Associates, a total of 221 mergers and acquisitions were announced in the health care industry during the first quarter of 2008, a 27% decline from the 301 deals announced in the prior quarter. Based on preliminary figures, a total of $27.3 billion was committed to fund the first quarter’s M&A activity, representing a 50% decrease from the $54.6 billion spent during Q4:07. Even so, the health care merger and acquisition market remains strong relative to historical levels during the past five years and relative to the recent turmoil in the financial markets.
The Health Care M&A Market First Quarter 2008
Dollar Amounts By Sector*
First Quarter 2007
Percent of Quarter
Home Health Care
Physician Medical Groups
<1% Labs, MRI, Dialysis 22,841,000 <1% Rehabilitation 6,300,000 <1% Behavioral Health Care 0 — Other Services 2,328,100,000 9% Services subtotal $ 4,649,855,000 17% Medical Devices $ 7,055,230,000 26% Biotechnology 6,846,451,000 25% Pharmaceuticals 5,986,360,000 22% e-Health 2,761,890,000 10% Technology subtotal $22,649,931,000 83% Total health care $27,299,786,000 100% *Preliminary Figures The health care technology segment attracted the largest amount of capital, capturing over four dollars out of every five invested in health care M&A. The quarter also posted eight billion-dollar deals, primarily in technology sectors, worth a combined total of $14.8 billion, or 54% of all M&A dollars in Q1:08. The number of deals announced in each sector of the health care industry appears in the chart below, along with comparisons to the prior quarter (Q4:07) and the year-ago quarter (Q1:07). The Health Care M&A Market Q1:08 – Deal Volume By Sector Q1:08 Q4:07 % Q1:07 % Sector Deals* Deals Change Deals Change Services Segment: Long-Term Care 26 23 13% 42 -38% Physician Groups 12 14 -14% 9 33% Home Health Care 11 9 22% 10 10% Hospitals 10 15 -33% 9 11% Labs, MRI, Dialysis 10 16 -38% 14 -29% Managed Care 7 6 17% 5 40% Rehabilitation 6 5 20% 1 500% Behavioral Health Care 3 3 0% 4 -25% Other 23 32 -28% 20 15% Services Subtotal 108 123 -12% 114 -5% Technology Segment: Medical Devices 35 67 -48% 39 -10% Pharmaceuticals 34 49 -31% 34 0% Biotechnology 29 47 -38% 35 -17% e-Health 15 15 0% 15 0% Technology Subtotal 113 178 -37% 123 -8% Grand Total 221 301 -27% 237 -7% *Preliminary figures These results clearly point to the fact that the M&A market in early 2008 has declined from the record-setting peaks of activity set in 2006 and 2007. “After two record-breaking years, both deal and dollar volume in the health care M&A market have slackened,” stated Sanford Steever, Ph.D., editor of The Health Care M&A Report. “While not every year can be expected to shatter existing records, 2008 still promises to have one of the stronger showings in the past five years, particularly in the area of technology-oriented sectors,” added Mr. Steever. The Health Care industry is continuing to attract interest from potential deal makers. “We all know that borrowing has become more difficult, that real estate has become more illiquid and that financial buyers are largely sitting on the sidelines,” commented Stephen M. Monroe, managing editor at Irving Levin Associates. “But we also know that the health care industry is about as close to anti-cyclic as you can get, that the industry remains fragmented and ripe for consolidation and that money is still available for deal making. Companies still want to grow, and they will pursue deals if that advances their strategic goals.” “The ups and downs in the financial markets have by no means brought the M&A market to a halt; they have, however, redefined the opportunities the market makes available,” Mr. Steever summarized. “Now that the stock market has sloughed off the ‘acquisition premium’ that had kept it high, a number of well-run companies are attractively priced—but probably not for too long.” For more information on The Health Care M&A Information Service, The Health Care Acquisition Report or for a subscription to any Irving Levin publication, call 800-248-1668. Irving Levin Associates, Inc., established in 1948, has headquarters in Norwalk, CT and is online at www.levinassociates.com. This privately held corporation publishes research reports and newsletters, and maintains merger and acquisition and venture capital databases, on the health care and senior housing markets. Click here to get more information on any of our Publication