FOR IMMEDIATE RELEASE
Lisa E. Phillips, Editor
Stephen M. Monroe, Editor
800-248-1668
203-846-6800
Fax: 203-846-8300
pressreleases@levinassociates.com
NORWALK, CT – February 3, 2014 – Health care merger and acquisition activity increased marginally in the fourth quarter of 2013, compared with the previous quarter. For the full year, Q4:13 marked the highest level of deal-making. Deal volume rose 4% versus the third quarter, with 281 deals announced. This year’s fourth quarter did not outperform the same quarter a year ago, when 310 deals were announced, according to Health Care M&A News.
The Health Care M&A Market – Deal Volume by Sector
Q4:13
Q3:13
Q4:12
Sector
Deals
Deals
%
Changed
Deals
%
Changed
Services
Behavioral Health Care
2
2
0%
3
-33%
Home Health & Hospice
10
5
100%
9
11%
Hospitals
21
24
-13%
37
-43%
Laboratories, MRI & Dialysis
8
8
0%
11
-27%
Long-Term Care
65
59
10%
61
7%
Managed Care
4
6
-33%
6
-33%
Physician Medical Groups
20
15
33%
19
5%
Rehabilitation
6
4
50%
7
-14%
Other
14
37
-62%
37
-62%
Services subtotal
150
160
-6%
190
-21%
Technology
Biotechnology
30
25
20%
32
-6%
eHealth
24
17
41%
22
9%
Medical Devices
30
23
30%
35
-14%
Pharmaceuticals
47
44
7%
31
52%
Technology subtotal
131
109
20%
120
9%
Grand Total
281
269
4%
310
-9%
Source: Health Care M&A News, January 2014
Deal value slowed considerably, however. M&A activity in Q4:13 totaled $43.6 billion, down 16% versus the $51.6 billion spent in Q3:13. Deal value increased by 79% compared with the fourth quarter of 2012, when buyers committed just $24.3 billion. Pharmaceutical transactions made up 44% of the Q4:13 dollar volume, at approximately $19.3 billion. Thanks to a single deal, McKesson Corporation’s original bid of $8.3 billion for the German drug distributor Celesio, the “Other” sector ranked second in share of dollars, at 24% and $10.3 billion. The Long-Term Care sector was third, with 9% of all M&A dollars spent in the fourth quarter, at $3.9 billion.
The Technology sector showed particular strength, with each segment turning in positive performances. Technology deals increased 20% overall compared with Q3:13. eHealth transactions staged a strong comeback, up 41%, as health care providers shifted their attention to data analytics as a means to cut costs and improve patient outcomes. After a year-long slump in deal volume, the Medical Device sector showed some improvement, although it was still off the pace set in Q4:12. Biotechnology companies got a boost as pharmaceutical companies slashed R&D spending and turned to promising startups to replenish their product pipelines. In the Pharmaceutical sector, generics and specialty pharmaceutical companies were in high demand.
The Services sector did not fare as well, ending the fourth quarter with a decrease of 6% in deal volume. Several segments saw gains, however, as acquirers shifted their attention to the post-acute care sectors, particularly Long-Term Care (+10%), Home Health & Hospice (+100%) and Rehabilitation (+50%). Physician Medical Groups were still hot commodities for health systems, hospitals and public companies, as deal volume rose 33% in the fourth quarter, compared with the previous quarter.
Full-year totals for 2013 showed fewer deals announced, but higher prices paid. Preliminary figures show 1,002 healthcare deals were announced, down 8% compared with the 1,091 recorded in 2012. Deal value surpassed 2012’s total: approximately $163.5 billion was committed to deals in 2013, compared with the abysmal total spend of $143.7 billion the year before. The Long-Term Care sector hit a record 223 deals last year, with the Pharmaceutical sector ranking second, with 151 deals announced.
“The health care market is moving beyond the uncertainty that surrounded implementation of the Affordable Care Act,” said Lisa E. Phillips, editor of Health Care M&A News. “Acquirers now are investing in improving patient outcomes, whether it’s buying a long-term care facility or a data analytics company that will help to streamline operations and contain costs.”
M&A activity is likely to remain strong in 2014. “The impact of long-set regulations will influence some deals, such as the switch to the ICD-10 coding system on October 1,” Ms. Phillips said. “The influx of newly insured consumers has already influenced some transactions, and will impact many more in the future.”
For more information on The Health Care M&A Information Source or The Health Care M&A Report, or for a membership to any of Irving Levin Associates’ subscriptions, please 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 databases, on the health care and senior housing markets.
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