Health Care M&A Spending Grows In Q2 2013, Compared With Q1 2013, According To Irving Levin Associates, Inc.

Staff Writer | Irving Levin Associates. Inc. | July 29, 2013

Health care merger and acquisition activity strengthened in the second quarter of 2013. Deal volume was up 10% versus the previous quarter, with 223 deals announced. However, the quarter underperformed (-15%) in comparison with the same quarter a year ago, according to The Health Care M&A Report. Deal value rose significantly compared with the previous quarter. The preliminary total for health care M&A activity in the second quarter is $52.6 billion, up nearly 252%, compared with the $14.9 billion spent in Q1:13. Deal value held steady compared with the second quarter of 2012, when buyers committed $52.3 billion.

Three sectors posted declines compared with the previous quarter: Behavioral Health Care (-43%), eHealth (-63%) and Hospitals (-32%). In the Behavioral Health sector, the number of M&A deals is typically fewer than 10 announced per quarter, so even a minor change in the number of deals can result in exaggerated swings. The eHealth sector, however, is seeing a definite slowdown from the M&A frenzy that occurred in Q2:12, when 24 deals were announced. Since then, deal-making activity has tapered off: only six deals were announced in the most recent quarter. In the Hospital sector, economic pressures brought on by weakening inpatient volumes and Medicare reimbursement reductions have created an atmosphere of uncertainty, particularly for non-profits. “Survival of the biggest” is one motivation behind big hospital deals such as Tenet Healthcare Corp.’s (NYSE: THC) $4.3 billion acquisition of Vanguard Health Systems (NYSE: VHS).