Health Care Activity Spikes, Dominates M&A Market

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It’s going to be a big year for health care mergers and acquisitions, with overall activity for 2011 expected to be 20%, higher than last year, according to The Health Care M&A Report, a new report from Irving Levin Associates. And given results from the past decade, 2011 will be among the top five years for health care M&A. “With an average of $62 billion committed to healthcare M&A each quarter, and only $19.4 billion needed to equal the $205.3 billion spent in 2010, 2011 is “definitely “poised to surpass last year’s results by about 20%,” Sanford Steever, editor of the report, said in a statement. “While M&A activity may have slipped in other industries this year, just the opposite is true in health care.” The report indicates that a total of 707 deals with a combined worth of $185.9 billion and a total of 217 transactions worth $58.4 billion were posted in the health care M&A market during the first three quarters and third quarter of this year, respectively. Despite a “very rocky ride” for the equity markets during the third quarter, health care M&A fared nicely in the time period, accounting for 31% of the 704 deals announced in 2011 and 31% of the $185.6 billion spent to fund them. Health care services transactions accounted for 111 deals, or 51% of the quarter’s total deal volume, in third-quarter 2011. Health care technology posted 106 deals, or the remaining 49%. Medical devices, with 47 deals on its roster, had the largest number of deals for any individual sector, followed by long-term care, with 27 deals; and physician medical groups, with 25. Together, these three groups contributed 99 deals, or 46% of the quarter’s total deal volume. Moreover, the report’s authors point out, the medical device industry cindeed ontinues to attract the majority of investor interest and dollars. For the first three quarters of 2011, medical devices accounted 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,” Stever observed. “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. They are instead focusing on growth by acquiring more mature companies with innovative technologies and established revenue streams.” To view the abstract, click here: