FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
800-248-1668
Fax: 203-846-8300
pressreleases@levinassociates.com
HEALTH CARE M&A ACTIVITY SURGES IN THE FOURTH QUARTER OF 2002 According to Irving Levin Associates, Inc.
NEW CANAAN, CT –January 29, 2003 – While other sectors of the merger and acquisition market witnessed a slowdown in activity during 2002, the health care M&A market posted solid gains and ended the year with a surge in transactions not seen in nearly two years. With almost all segments reporting increases in deal volume, there were a total of 286 publicly announced health care mergers and acquisitions in the fourth quarter 2002, representing a 38% increase from the previous quarter and a 40% increase over the fourth quarter in 2001.
The Health Care M&A Market 4:02 Deal Volume By Sector
Sector
Q4:02
Deals*
Q3:02
Deals
%Change
Q4:01
Deals
%Change
Services:
Long-Term Care
20
17
+18%
22
-9%
Laboratories
18
10
+80%
11
+64%
Hospitals
15
18
-17%
27
-44%
Home Health
8
8
0%
2
+300%
Managed Care
6
5
+20%
6
0%
Physician Medical Groups
6
11
-45%
5
+20%
Behavioral Health
3
1
+200%
4
-25%
Rehabilitation
3
3
0%
5
-40%
Other
53
36
+47%
33
+61%
Services Subtotal
132
109
+21%
115
+15%
Technology:
Pharmaceuticals
60
34
+76%
27
+122%
Medical Devices
46
41
+12%
25
+84%
Biotechnology
28
16
+75%
21
+33%
e-Health
20
8
+150%
16
+25%
Technology Subtotal
154
99
+55%
89
+73%
Grand Total
286
208
+38%
204
+40%
*Preliminary figures
The dollar value of the deals announced in the fourth quarter 2002 was $12.1 billion, compared with $68 billion in the third quarter. However, if Pfizer’s proposed acquisition of Pharmacia for $60 billion is removed from the third quarter statistics, the value of the fourth quarter’s transactions increased by approximately 50%. For the full year, approximately $101 billion was spent in the health care M&A market, up from $75.3 billion in 2001. “With health care consuming an ever greater share of the U.S. economy, and health care spending growing at three times the rate of inflation, it makes sense that the health care M&A market would attract a high level of investment interest,” stated Stephen M. Monroe, managing editor at Irving Levin Associates, Inc., which publishes The Health Care M&A Report.
During the fourth quarter 2002 nearly 50% of the funds expended and 37% of the transaction activity was in the pharmaceutical and medical device segments, the two segments that have dominated the M&A volume for several quarters. “As patents on many blockbuster drugs expire, large and small pharmaceutical companies have been looking at acquisitions to bring them complementary products as well as increased earnings, and we expect this trend to continue in 2003,” stated Sanford B. Steever, Ph.D., editor of the Report.
There has also been an increase in cross border transactions, with two of the three largest deals in the fourth quarter involving U.S. companies acquiring foreign firms. In the quarter’s largest transaction, GE Medical Systems announced the purchase of Instrumentarium Corp., Finland’s largest medical equipment maker with $1.1 billion of revenues, for $2.06 billion. In the second largest transaction, Merck & Co. purchased the remaining 49% interest in Banyu Pharmaceutical Co., one of the top 10 pharmaceutical companies in Japan, which gave Merck full control over the company.
In the health services segment, the beleaguered long-term care sector led the pack in the fourth quarter with 20 transactions. Many of the sales represent divestitures from companies that are in the process of restructuring, and this trend should continue in 2003. The largest health services transaction was the announced $1.125 billion acquisition of Health MidWest by HCA Inc., which beat out nine other bidders for the nonprofit operator of 14 hospitals with 2,550 beds. It will be the largest acquisition by HCA in several years.
For more information on The Health Care M&A Report, or for a subscription to any Irving Levin publications, call 800-248-1668. Irving Levin Associates, Inc., established in 1948, has headquarters in New Canaan, 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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