Health Care Services M&A Rebounds, Up 24% in 2010

After a rough 2009, health care services mergers and acquisitions rebounded strongly in 2010.  The number of deals in the sector reached 458 in 2010, up 24% from the previous year according to a new report from Levin Associates.

In addition, total dollar amounts spent on M&A activity surged 425% to $64.9 billion in 2010, up from $12.3 billion in 2009.

“While the middle market continued to thrive in 2010, we saw a return of the mega-deal with 18 separate billion-dollar transactions announced during the year as compared with just one in 2009. The passage of significant health care reform in March 2010, just one year after the generational market bottom, helped to accelerate the recovery in the markets,” said Sandy Steever, editor of The Health Care Services Acquisition Report.


During the year, the hospital acquisition market improved as capital started to return and presented several opportunities for companies.  Seventy-three M&A transactions were announced in 2010, these deals involved 175 hospitals with 29,294 beds for a combined price of $12.8 billion said the report.  However, the number of bankruptcy and distressed sales brought the average price to revenue multiple down from 0.78x in 2009 to 0.66x in 2010.

In other highlights, Physician Medical Group merger and acquisition activity rose to its highest level in five years. In 2010, this sector posted 63 deals involving 2,370 physicians for a combined total of $425.4 million. Merger and acquisition deal volume thus increased 54% year-over year while dollar volume skyrocketed 330%.

“As hospitals and integrated delivery systems attempt to create Accountable Care Organizations, they are building the physician component of these organizations through acquisition,” said Steever. “Further, hospital-based physician practices stand to prosper more than freestanding practices in the emerging reimbursement environment, prompting physicians to join forces with acute care providers.”