Health Care Services M&A Set for Rebound after
Decline in 2009, According to Irving Levin
March 30, 2010 02:31 PM Eastern Daylight Time
NORWALK, Conn.--(EON: Enhanced Online News)--Merger and acquisition activity in the health care industry’s
service sectors reflected the impact of the credit crunch and the economic downturn. A total of 371 deals were
announced in nine sectors of the health care services industry, the lowest level in the five-year period 2005-09.
Further, the dollar volume spent on M&A activity dropped 39% from $18.2 billion in 2008 to $13.2 billion in 2009.
“While the 2009 merger and acquisition market for health care services reflected recent economic woes, it also
marked a turning point as the economy began to climb out of the Great Recession. As in 2008, the 2009 M&A
market was characterized by an absence of mega-deals, but an active middle market, particularly in consumer-
oriented sectors,” commented Sandy Steever, editor of The Health Care Acquisition Report, Sixteenth Edition.
The Hospital acquisition market mirrored the general market trend from the mega-deals of years past into the middle
market in 2009. Fifty-two transactions were announced in 2009 involving 80 hospitals with 10,604 beds for a
combined total of $1.7 billion. This represents a decrease from the $2.5 billion that was spent in 2008 to acquire 78
hospitals with 5,282 beds in 60 deals.However, certain crucial indicators of hospital pricing rose in 2009 from their
levels in 2008 and 2007, with a median price-to-revenue multiple of 0.77x and a median price per bed of $382,920.
Both multiples stand at the high end of values for the period 2005–2009, and reflect the low level of bankruptcy and
distressed sales in 2009.Stephen M. Monroe, a partner at Irving Levin Associates, commented: “With just one
distressed facility sale for 2009, the targeted hospitals tended to be of higher quality and greater financial stability
than in previous years, and so could command higher prices on average. On the flip side, however, with the market
feeling the effects of the Credit Crunch, it also appears likely that hospitals faced with bankruptcy in 2009 were
unable to find financially robust buyers.”
In other highlights, merger and acquisition activity in the Behavioral Health, Laboratory and Managed Care sectors
fell to their lowest levels in five years over concerns about reimbursement protocols, the new administration’s
evolving health care reform and a lack of investor enthusiasm in industries faced with financial uncertainty. However,
in the “Other Services” category, the contract research organization, or CRO, industry generated a total of 25 deals
in 2009, up from 16 deals in 2008. Mr. Monroe noted, “With technology sectors such as Pharmaceuticals and
Medical Devices leading the health care M&A market, other industries that directly service these sectors, such as
CROs, stand ready to attract M&A dollars.” Mr. Steever added, “With the recent passage of health care reform,
and the addition of up to 30 million customers to the health insurance rolls, investors will very likely use mergers and
acquisitions to capture that increased market share in the near future. Targeted sectors will most likely include
Hospitals, Managed Care and retail-oriented health care providers.”
The Health Care Acquisition Report, Sixteenth Edition, contains nearly 200 pages of hard-to-find information on
all publicly announced hospital, managed care, laboratory services, physician medical group, behavioral health,
rehabilitation and other services mergers and acquisitions in 2009. Two other services sectors, long-term care and
home health and hospice care, are treated separately in The Senior Care Acquisition Report, Fifteenth Edition.
Irving Levin Associates, Inc. is a Norwalk, Connecticut-based research and publishing firm specializing in health care
investments. The firm has more than 50 years experience in the health care and seniors housing acquisition market.
The Health Care Acquisition Report, Sixteenth Edition, may be purchased for $595 by calling 800-248-1668 or
logging in at www.healthcaremanda.com.
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Irving Levin Associates, Inc.
Sanford B. Steever, 800-248-1668
Stephen M. Monroe, 800-248-1668