Health Care M&A On Track to Shatter Records

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Get ready for a record-breaking year on the health care mergers and acquisitions (M &A) front.

According to the Health Care M &A Report, issued last week by Norwalk, Conn.-based Irving Levin Associates, dollar volume committed to M &A activity in the health care sector during the second quarter of 2011 rose significantly over comparable figures for the first quarter of 2011 (up 44%) and the second quarter of 2010 (up 61%). A total of $73.5 billion was spent to finance health care M &A during second-quarter 2011, with M &A activity expected to break all previous records in the market. In the first half of 2011, 472 health care M &A deals worth a combined total of nearly $125 billion were posted, according to the report. The authors also note that annualizing these figures supports the prediction that 2011 will end with approximately 950 deals worth $250 billion, thereby setting a new record in dollars spent on M &A in the health care industry

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Medical devices saw the highest volume of M &A activity for the quarter--more than $33 billion worth, or an increase of 45% over the previous quarter. M &A activity also remains strong in facility-based sectors, such as hospitals and long-term care. “I think we will continue to see more hospitals and physician groups affiliating in the next 18 to 24 months,” asserts Sanford Steever, editor of the report. Steever asserts. The only glitch, he observes, centers on the debt ceiling; should there be an untoward occurrence, it would impact the stark market and possibly, have a negative effect on other markets, including health care.

Steever attributes the overall trending upward of M &A activity in part to fragmentation in the health care industry; hospitals and physician practices, he states, are “undertaking M &A for economies of scale, to create more efficient provider networks and to contain costs.” Moreover, he notes, investors perceive such areas as medical devices as smart investment opportunities, especially given that the need for medical devices will increase as the population continues to age.