Healthcare

A total of 199 mergers and acquisitions were announced in the first quarter of 2009 with a deal value of $127.4 billion, the largest quarterly amount ever recorded in the healthcare M&A market.

The deal value is nearly a five-fold increase over the $22 billion spent the same time period last year and three-and-a-half times more than the amount spent during the fourth quarter of 2008, according to a report prepared by Irving Levine Associates. The $127 billion spent during the first quarter included four multi-billion dollar deals. Except for pharmaceuticals and biotechnology, most sectors of the healthcare industry did not share in the good fortunes. During the quarter, Pfizer purchased Wyeth for $68 billion and Merck’s acquired Schering-Plough for $41.1 billion.

Pharmaceuticals accounted for 88.6 percent of the quarter’s M&A dollars with biotechnology in second with 8 percent. The rest of the healthcare services sectors accounted for 0.02 percent of the M&A money.

The quarter’s M&A activity was down from the 230 deals completed during the same time period a year ago. The 199 deals was also a 13 percent drop-off from the fourth quarter of 2008. The first sign that the healthcare industry is experiencing the same problems as the larger economy is the drop in deal volume among the services sector. Deal volume in six of the nine services sectors declined when compared to the previous and year-ago quarters.

The healthcare industry has been a private equity darling for many years due to the industry’s size and growth. Healthcare should continue to outperform other industries since capital has not dried up and some deals are being completed, especially deals in the lower-middle market (transaction values in the $5 million to $250 million range).

Healthcare is the largest industry in the United States, providing about 15 million jobs. About 580,000 businesses divided into nine broad sectors comprise the healthcare industry. They are hospitals, nursing and residential care facilities, offices of physicians, dental offices, home health care services, offices of other health practitioners, outpatient care centers, other ambulatory health care services and medical and diagnostic laboratories.

Sources

• First Quarter 2009 M&A Results – Nearly 200 Deals Posted Worth Record $127.4 billion. LevinAssociates.com
• PricewaterhouseCoopers 12^th Annual Global CEO Report: Healthcare.