Q1 2013 Health Care M&A Spending Falls 50% From Q1 2012

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According to a new report by Irving Levin Associates, Inc., the health care merger and acquisition market may be cooling. Spending in the first quarter of this year was half of what it was during the same time last year.

“Overall, the health care merger and acquisition market is doing smaller, more strategic deals while it waits for the economy to improve and the results of the sequester to settle in,” state Lisa E. Phillips, editor of The Health Care M &A Report in a press release. “Deal-making activity seemed to be picking up towards the end of the quarter, so we expect more positive results in the second quarter.”

According to Irving Levin Associates' analysis, the number of health care mergers and acquisitions was down 33% versus the previous quarter and down 31% compared to the first quarter of 2012. Last year, companies announced 295 deals, and this year they announced just 204 deals.

The amount of money that changed hands was also down. In total $14.6 billion was spent in the first quarter of 2013, which is half of the $29.4 billion buyers committed in the first quarter of 2012.

Of course the fall in number of deals is unsurprising as 2012 was a bit of an unusual year. According to Irving Levin, the number of announced health care merger and acquisition transactions in 2012 (1,063) was the highest since 2007.

Falling dollar values of transactions also is a continuing trend. As many deals as were announced last year, the total value of those transactions ($143.3 billion) was the lowest since 2003, Irving Levin Associates stated. It indicates a lot of activity by a diverse group of buyers, but less willingness to take on very large deals ahead of changes coming with health care reform.

The Laboratories, MRI & Dialysis sector was up 60% compared to the same quarter of last year, but because there are comparatively few deals in this sector, it is prone to larger percentage swings. The total change in number of deals was just three more than the number announced in Q1 of 2012.

  Q1:13 Q4:12   Q1:12  
Sector Deals Deals %
Changed
Deals

%

Changd

Services          
Behavioral Health Care 7 3 133% 7 0%
Home Health & Hospice 9 9 0% 11 -18%
Hospitals 23 34 -32% 27 -15%
Laboratories, MRI & Dialysis 8 11 -27% 5 60%
Long-Term Care 44 61 -28% 41 7%
Managed Care 2 6 -67% 6 -67%
Physician Medical Groups 12 19 -37% 21 -43%
Rehabilitation 1 7 -86% 5 -80%
Other 21 36 -42% 38 -45%
     Services subtotal 127 186 -32% 161 -21%
Technology          
Biotechnology 11 32 -66% 33 -67%
eHealth 16 22 -27% 30 -47%
Medical Devices 24 35 -31% 45 -47%
Pharmaceuticals 26 31 -16% 26 0%
      Tecnology subtotal 77 120 -36% 134 -43%
Grand Total 204 306 -33% 295 -31%

Source: Irving Levin Associates, April 2013