Health Care Mergers and Acquisitions Poised for 20 Percent Growth According to New Report from Irving Levin Associates, In
NORWALK, Conn.--(BUSINESS WIRE)-- In the health care industry, the third quarter dollar volume contributed $58.9 billion, or 32%, to the $185.9 billion spent on merger, acquisition and takeover activity during the first nine months of 2011. “With an average of $62.0 billion committed to health care M&A each quarter, and only $19.4 billion needed to equal the $205.3 billion spent in 2010, 2011 is poised to surpass last year’s results by about 20%. While M&A activity may have slipped in other industries this year, just the opposite is true in health care,” observed Sanford Steever, editor of The Health Care M&A Report.
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THE HEALTH CARE M&A MARKET THIRD QUARTER 2011 DOLLAR AMOUNTS BY SECTOR*
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| Sector |
Dollar Amount
Third Quarter 2011 |
Percent of Quarter |
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| Medical Devices | $ 12,919,000,000 | 22% | ||||||
| E-Health | 4,723,000,000 | 8% | ||||||
| Pharmaceuticals | 3,600,000,000 | 6% | ||||||
| Biotechnology | 2,979,000,000 | 5% | ||||||
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Technology subtotal |
$ 24,221,000,000 | 41% | ||||||
| Laboratories, MRI & Dialysis | $ 2,176,000,000 | 4% | ||||||
| Long-Term Care | 1,389,000,000 | 2% | ||||||
| Hospitals | 795,000,000 | 1% | ||||||
| Managed Care | 170,000,000 | >1% | ||||||
| Home Health | 84,000,000 | >1% | ||||||
| Rehabilitation | 8,000,000 | >1% | ||||||
| Behavioral Health | — | — | ||||||
| Physician Medical Groups | — | — | ||||||
| Other Services | 30,039,000,000 | 51% | ||||||
| Services subtotal | $ 34,661,000,000 | 59% | ||||||
| Total health care | $ 58,882,000,000 | 100% | ||||||
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*Preliminary figures |
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The table above lists the dollar amount that each sector of the health care industry captured in the third quarter, along with the percentage contribution of each to the $58.9 billion total committed during that period.
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THE HEALTH CARE M&A MARKET Q3:11 – DEAL VOLUME BY SECTOR |
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| Q3:11 | Q2:11 | % | Q3:10 | % | ||||||||||||||
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Sector |
Deals* |
Deals |
Change |
Deals |
Change | |||||||||||||
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Services Segment: |
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| Long-Term Care | 27 | 43 | -37% | 29 | -7% | |||||||||||||
| Physician Groups | 25 | 27 | -7% | 13 | 92% | |||||||||||||
| Hospitals | 16 | 31 | -48% | 25 | -36% | |||||||||||||
| Home Health Care | 6 | 7 | -14% | 9 | -33% | |||||||||||||
| Labs, MRI, Dialysis | 5 | 4 | 25% | 9 | -44% | |||||||||||||
| Managed Care | 5 | 4 | 25% | 7 | -29% | |||||||||||||
| Behavioral Health Care | 1 | 3 | -67% | 2 | -50% | |||||||||||||
| Rehabilitation | 4 | 2 | 100% | 1 | 300% | |||||||||||||
| Other | 22 | 20 | 10% | 25 | -12% | |||||||||||||
| Services Subtotal | 111 | 141 | -21% | 120 | -8% | |||||||||||||
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Technology Segment: |
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| Medical Devices | 47 | 36 | 31% | 45 | 4% | |||||||||||||
| Pharmaceuticals | 24 | 34 | -29% | 19 | 26% | |||||||||||||
| Biotechnology | 14 | 20 | -30% | 34 | -59% | |||||||||||||
| e-Health | 21 | 16 | 31% | 22 | -5% | |||||||||||||
| Technology Subtotal | 106 | 106 | 0% | 120 | -12% | |||||||||||||
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Grand Total |
217 | 247 | -12% | 240 | -10% | |||||||||||||
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*Preliminary figures |
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Health care deal volume during Q3:11 posted modest declines from the figures recorded in both the previous and year-ago quarters. The table above presents the percentage change in M&A activity in each sector from these two corresponding periods.
The quarter’s largest deal involves the proposed combination of two pharmacy benefits managers: Express Scripts announced plans to acquire Medco Health Solutions for $29.1 billion. “Pharmacy benefits managers—or PBMs—seek to tame the rising costs of prescription drugs. Since acquisitions can wring out unwanted costs and find new efficiencies, such combinations may well offer a win-win for companies and consumers alike. This kind of a deal may well serve as a model for others in the health care services sectors who seek to hold costs down while expanding their service offerings,” stated Stephen M. Monroe, managing editor at Irving Levin Associates, Inc., which publishes the Report.
The Medical Device industry continues to attract the majority of investor interest and dollars. For the first three quarters of 2011, Medical Devices account for $58.8 billion, or 32% of all health care M&A dollars. “Strategic buyers have strong balance sheets while financial buyers have equally healthy war chests, and with interest rates low, they both want to put these funds to work. While they once used this money to fund start-ups and basic R&D, recent concerns over a longer and more arduous regulatory approval process have made those uses of capital less attractive,” noted Mr. Sanford Steever. “They are instead focusing on growth by acquiring more mature companies with innovative technologies and established revenue streams.”
For the first three-quarters of 2011, the health care merger and acquisition market has posted 707 deals worth a combined total of $185.9 billion. Based on results from the past 10 years, 2011 will take its place among the top five years for health care M&A.
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 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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CONTACT:
Irving Levin Associates, Inc.
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: 800-248-1668
Fax: 203-846-6800
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