In 2011, a total of $227.4 billion was committed to financing healthcare merger, acquisition and takeover activity, representing an 11 percent increase over the $205.6 billion spent in 2010, according to a new report from Irving Levin Associates, Inc.
In its “Health Care M&A Report,” Irving Levin Associates notes that based on dollars committed to M&A activity, 2011 is the fourth-largest year of the past 10 years. In terms of deals announced, 2011 saw a total of 980 transactions in 13 sectors of the healthcare industry, a 3 percent decrease from the 1,007 deals in 2010. However, deal volume is expected to increase to 1,000 and more as new information, such as annual 10-K filings, brings more transactions to light.
The four sectors posting the most notable growth in 2011 were hospitals, long-term care, managed care and physician medical groups. Overall, the 2011 services sectors posted gains in deal and dollar volume over 2010 while the corresponding technology sectors saw declines.
For the past five years, the healthcare M&A market has generated on average of 1,000 deals worth approximately $230 million each year, noted the report.
“We predict that the dynamics of the 2011 market will forge ahead into 2012,” stated Sanford B. Steever, PhD, editor of the report. “In particular, we expect to see strong deal making in the four technology sectors as well as in facility-based service sectors, such as hospitals and long-term care. Despite the rhetoric of repeal, hospitals and other providers will keep pursuing mergers and acquisitions to assemble the component parts for building accountable care organizations.”
The pace of healthcare M&A in 2012 may be influenced by external factors.
“Election-year wrangling will tend to lengthen the period of due diligence in deal making as buyers and sellers attempt to see which way the political winds are blowing,” said Stephen M. Monroe, managing editor at Irving Levin Associates. “Deals in provider sectors dependent on government payments will be particularly vulnerable as changes to reimbursement protocols, real or threatened, are bandied about. Deal makers clearly prefer non-volatile markets.”
Despite the potential influence of external factors on activity, the merger and acquisition market for the healthcare industry is expected to remain robust for 2012.
“The fundamental forces driving the M&A market for healthcare remain firmly in place,” noted Steever. “Companies will undertake M&A to grow their businesses, gain market share, create operational and financial synergies and overcome a fragmented delivery system, among others.”
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