Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Fax: 203-846-8300



NORWALK, CT – March 25, 2008 – Merger and acquisition activity in the health care industry’s service sectors moderated in 2007 after the record year set in 2006. A total of 489 deals were announced in nine sectors of the health care services industry, down 8% from the 534 deals announced in 2006. Even though the dollar value of those deals declined 37% from $90 billion in 2006 to $57 billion in 2007, 2007 still outspent every other year. “While the M&A market for health care services rode a bull market from 2003 through the middle of 2007, the recent crisis in the credit markets tempered activity in the second half of the year. Still, our figures reveal that 2007 is the second-largest year ever in terms of dollars committed to health care services M&A,” commented Sandy Steever, editor of The Health Care Acquisition Report, Fourteenth Edition. “While the credit crisis sidelined a number of financial buyers toward the end of 2007, especially private equity firms, strategic buyers, who had avoided bidding wars with financial buyers, entered and picked up the slack in the market. The relative absence of financial buyers appears to have depressed acquisition pricing from the middle of 2007 through the present,” continued Mr. Steever.

The hospital acquisition market in 2007 paralleled the activity in the overall M&A market. Fifty-eight transactions were announced in 2007 involving 149 hospitals with 22,440 beds for a combined total of $8.8 billion. This represents a decrease from 2006 when 57 deals were announced involving 249 hospitals with 54,550 beds for $35 billion, an amount that included the record-breaking $33 billion privatization of HCA by a consortium of private equity firms. Hospital pricing in 2007 declined slightly with average and median price-to-revenue multiples of 0.74x and 0.60, respectively, from the corresponding 2006 figures of 0.75x and 0.73x, but still above their 2004 counterparts of 0.61x and 0.53x. Due perhaps to the real estate component of many hospital deals, financial buyers were largely absent themselves from the 2007 Hospital M&A market; a number of not-for-profit operators, including large Catholic systems, filled the gap left by their absence.

In other highlights, service industries related to the development and the delivery of pharmaceuticals, such as contract research organizations and infusion therapy providers, continued the robust M&A activity of 2006 through 2007. These businesses, along with many others included in the “Other” services sector in the Report, conduct their operations at sites alternative to, or perform services ancillary to, other providers who are thought to be more centrally placed in the health care delivery system and thus more immediately linked with patients and consumers. “Many of the businesses covered in our Other Services sector appear to be more amenable to retail models than, say, a physician medical group, and are thus better able to spearhead the emerging paradigm of health care as a consumer good,” commented Stephen M. Monroe, a partner at Irving Levin Associates. “The jury is still out on whether health care can be successfully treated as a consumer good. The sluggish development of health savings accounts in the managed care sector, for example, suggests that people may have a limited tolerance for treating health care as a consumer good. However, we believe that this paradigm will be developed and tested to the fullest by a number of less-known health care services, and that it will be reflected there by robust M&A activity.”

The Health Care Acquisition Report, Fourteenth Edition, contains more than 200 pages of hard-to-find information on all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health, rehabilitation and other services mergers and acquisitions in 2007. Two other services sectors, long-term care and home health, are treated separately in The Senior Care Acquisition Report, Thirteenth Edition. Irving Levin Associates, Inc. is a Norwalk, Connecticut-based research and publishing firm specializing in health care investments. The firm has more than 50 years experience in the health care and seniors housing acquisition market. The Health Care Acquisition Report, Fourteenth Edition, may be purchased for $595 by calling 800-248-1668, or by clicking here.


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