According to the report, there were 1,063 healthcare M&A transactions in 2012 (the most since 2007), representing a dollar value of $143.3 billion (the lowest since 2003). The report concludes that healthcare reform is impacting the industry's acquisition environment and causing buyers to be less willing to invest in billion-dollar deals.
Monroe believes the heightened caution level is warranted.
"Although there is a lot of talk about accountable care organizations… I am still not convinced how successful they will be. I know I am a bit of the contrarian, but I was around when capitation and HMOs were the rage in the late 1990s, and that failed spectacularly. If hospitals, doctors, and the post-acute sector are all aligned to deliver effective, high-quality, and coordinated care, I still haven't figured out who is going to make the money and how it will be divided up," he says.
Despite the slump in healthcare M&A activity in Q1:13, Monroe does not anticipate that it is the start of a downward trend.
"We don't think the M&A activity will stay down for the rest of the year. We expect it to be slowly picking up and then [to see] another active second half of the year, but most so in the fourth quarter… Fourth-quarter deal volumes usually tend to be high because there is always a push to get deals done before year end, whether for tax reasons, reporting reasons, or league table reasons for the investment bankers," he says.
Monroe also notes that M&A activity was down in many industries in the first quarter of 2013, not just in healthcare, possibly due to investor burnout from the high level of activity in the fourth quarter of 2012 and to concerns over sequestration and the federal deficit.