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Healthcare M&As: Volume Up; Value Down

Margaret Dick Tocknell, for HealthLeaders Media, April 26, 2012

"The distinction between biotech and pharma is blurring," Steever told HealthLeaders Media. He says biotechs are looking for money to develop their products so they purchase mature pharma companies to tap into their revenue streams. In turn, pharma companies, faced with patent expirations on some of their best earners, are interested in the products being developed by biotechs.

 

Steever says medical devices continue to be an important part of the M&A market despite a 19% decrease in deal volume and a whopping 73% drop in dollar value. "It’s taking a breather but it’s still a very hot market for M&A."

Laboratories, MRIs, and dialysis ($395 million), hospitals ($129 million), and behavioral health ($94 million) were the bottom market segments in terms of dollar value. The 62% drop in the number of deals for labs, MRIs and dialysis that may reflect declining reimbursements. Dialysis clinics in particular are at the mercy of falling Medicaid reimbursements.

While the number of hospital mergers and acquisitions in the first quarter of 2012 kept pace with activity during the comparable period in 2011, a lack of big portfolio deals contributed to a 93% drop in their value to $129 million.

Healthcare reform continues to drive some M&A activity, especially for hospitals, physicians groups and managed care. Steever says the acquisition of critical access hospitals is on the rise. The small hospitals, usually around 25-beds, want to join larger systems to reduce their costs and improve their negotiating position with vendors and health plans.

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