Health Care Defies M&A Trends, to See 20% Increase in 2011

Health care merger and acquisition volume totaled $58.9 billion in the third quarter of 2011, placing the sector on pace to strongly surpass its volume in 2010. Having seen $185.9 billion to date in 2011, heath care M&As should exceed last year’s activity by about 20%, says Levin Associates’ Health Care M&A Report for the third quarter, published last week.

“While M&A activity may have slipped in other industries this year, just the opposite is true in health care,” said Sanford Steever, editor of The Health Care M&A Report.

Of the third quarter volume total, technology deals comprised 41% of the activity while medical devices represented 22%. The market for devices continues to perform, Steever said.


“Strategic buyers have strong balance sheets while financial buyers have equally healthy war chests, and with interest rates low, they both want to put these funds to work. While they once used this money to fund start-ups and basic R&D, recent concerns over a longer and more arduous regulatory approval process have made those uses of capital less attractive,” noted Mr. Sanford Steever. “They are instead focusing on growth by acquiring more mature companies with innovative technologies and established revenue streams.”

The largest deal during the quarter involved the proposed combination of pharmacy benefits managers Express Scripts and Medco Health Solutions—for $29.1 billion.

“Since acquisitions can wring out unwanted costs and find new efficiencies, such combinations may well offer a win-win for companies and consumers alike,” said Levin Associates Managing Editor Stephen Monroe, of the deal. “This kind of a deal may well serve as a model for others in the health care services sectors who seek to hold costs down while expanding their service offerings.”


This year will take its place among the top five years for health care M&A, the report states.

Written by Elizabeth Ecker