A total of 233 mergers and acquisitions were announced in the healthcare industry during the second quarter of 2010, up 7 percent from the 218 deals announced in the prior quarter.
According to a new report from Irving Levin Associates, a total of $46.3 billion was committed to fund this M&A activity, up 41 percent from the $32.8 billion spent in the previous quarter and up 62 percent from the $28.5 billion spent in the second quarter of 2009.
Sanford Steever, editor of The Health Care M&A Report, said the increase in both deal and dollar volume over the previous quarter may be ascribed in part to the passage of healthcare reform in March, which has allowed companies to make better projections of their revenues and deal makers to negotiate more realistic valuations for companies involved in mergers and acquisitions.
Steever said several services sectors that depend on government reimbursement saw deal volume increase over the first quarter’s levels.
“With a new regulatory landscape coming into sharper focus, providers who rely on Medicare are better able to determine what their cash flow will be going forward,” he said. “This will in turn help them decide whether to pack up their business and sell or to expand through acquisitions.”
Some services sectors are being immediately impacted by the recently enacted legislation.
“Hospitals have responded with a 186 percent increase, quarter over quarter, in merger and acquisition activity, in the hopes of capturing their fair share of the 32 million previously uninsured patients,” Steever said.
The report indicates that medical technology sectors such as pharmaceuticals and medical devices continue to see the greatest amount of dollar volume in the healthcare merger and acquisition market, although services sectors are now capturing an increasing share of the overall activity.
“The first six months of 2010 saw $16.6 billion spent on M&A activity in the healthcare services sectors, which already exceeds the $12.4 billion spent on the same sectors in all of 2009,” said Stephen M. Monroe, managing editor at Irving Levin Associates. “Strategic and financial buyers alike are finding attractive acquisition opportunities, particularly in the middle market for health care services.”
The first half of 2010 registered a total of 453 deals in the healthcare industry with a combined value of $79.1 billion.
“If common wisdom holds, and the second half of the year performs better than the first, then 2010 is on track to generate over 900 deals worth between $165.0 billion and $175.0 billion,” said Steever. “While not a record-breaker, 2010 could rank as the fifth most active year in the past decade for M&A.”