Health Care M&A Spending Falls 50% in Q1 2013, Compared with Q1 2012, According to Irving Levin Associates, Inc.

Health Care M&A Spending Falls 50% in Q1 2013, Compared with Q1 2012, According to Irving Levin Associates, Inc.

Irving Levin Associates, Inc.Stephen M. Monroe, PartnerPhone: 203-846-6800Fax: 203-846-8300

Health care merger and acquisition activity plunged in the first quarter of 2013. (: ). Deal volume was down 33% versus the previous quarter, with just 204 deals announced. The quarter also sagged (-31%) in comparison with the first quarter a year ago, when 295 deals were announced, according to. Deal value dropped as well. The early total for M&A activity in the first quarter is just $14.6 billion, down 39% compared with Q4:12. Compared with the first quarter of 2012, when buyers committed $29.4 billion, deal value slumped 50% in Q1:13.

Behavioral Health Care was the only sector that posted a gain against the previous quarter, with deal volume up by 133% versus Q4:12. However, the seven deals announced in this sector in Q1:13 exactly matched the number of deals announced in Q1:12, which is more of an indication that deal-making in this sector picks up after the first of the year.

The Pharmaceutical sector also showed some weakening in deal volume, down 16% compared with Q4:12 and remaining flat compared with the year-ago quarter. Still, four of the first quarter’s 10 largest deals were announced in the Pharma sector, and three of those topped $1 billion.

“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,” said Lisa E. Phillips, editor of . “Deal-making activity seemed to be picking up towards the end of the quarter, so we expect more positive results in the second quarter.”

Even the Long-Term Care sector, which typically shows the most robust M&A activity, saw first-quarter deal volume slide by 28%, to 44 deals, compared with the previous quarter. The first quarter results were still higher than they were in the year-earlier first quarter, up 7%. “In long-term care, the fourth quarter is usually the most active quarter of the year, so it was no surprise to see a drop off in the first quarter of 2013,” according to Stephen M. Monroe, a partner at Irving Levin Associates. “That said, where we have seen a decline is in the large, over $100 million transactions. But there has been a decline in the mega deals across most of the health care segments, so long-term care is no exception.”

The number of announced health care M&A transactions in 2012 (1,063) was the highest since 2007, while the dollar value of those transactions ($143.3 billion) was the lowest since 2003, which indicates a lot of activity by a diverse group of buyers, but not the willingness to take on as many of the billion-dollar deals that were so prevalent in the past. This acquisition atmosphere has carried over into 2013 as companies decide how to approach the changes coming with health care reform.

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