For the first three-quarters of 2011, the healthcare merger and acquisition market has posted 707 deals with a combined worth of $185.9 billion. Experts predict total healthcare M&A activity for the year will surpass 2010 by 20 percent, according to a new report from Irving Levin Associates.
“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 poised to surpass last year’s results by about 20 percent,” observed Sanford Steever, editor of Irving Levin Associate’s The Health Care M&A Report, in a press release accompanying the report. “While M&A activity may have slipped in other industries this year, just the opposite is true in healthcare.”
In the healthcare industry, the third quarter dollar volume contributed $58.9 billion, or 32 percent, to the $185.9 billion spent on merger, acquisition and takeover activity during the first nine months of 2011.
Based on results from the past 10 years, 2011 will be among the top five years for healthcare M&A, the report concluded.
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,” said Stephen M. Monroe, managing editor of the report, in a press release. “This kind of a deal may well serve as a model for others in the healthcare services sectors who seek to hold costs down while expanding their service offerings.”
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 percent, of all healthcare 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 Steever. “They are instead focusing on growth by acquiring more mature companies with innovative technologies and established revenue streams.”