Health Care M&A on the Rise

November 12th, 2009 | Sources: Wall Street Journal


One would think that the continuous tumult caused by Big O’s effort to overhaul health care would give deal makers pause for thought, or that the festering recession might dampen M & A activity in health care, as it has in other sectors of the economy.

itsajungleoutthereBut that’s not the case, not by a long shot.

In fact, health care M & A activity is more robust this year than it has ever been, according to Dealogic.

Driven by Pfizer’s mega-acquisition of Wyeth and Merck’s deal for the Plough, the health care sector has accounted for about 30% of all mergers and acquisitions in the US this year based on dollar value. That’s 3 times normal.

And that doesn’t even account for several tech sector deals, such as Dell Inc.’s acquisition of Perot Systems, which have a distinctly health care-oriented subtext, or the recent $4.2 billion LBO of health data mining company IMS Health.

Several things have driven the frenzy.

In the health information technology arena, the Big O’s Economic Hail Mary set aside $30 billion to encourage providers to adopt electronic health records and that has driven up the value of a raft of EHR companies, both public and private.

Meanwhile, Big Pharma has decided that acquiring new drugs is cheaper and less risky than growing their own.

For their part, lenders remain confident that health care is destined to grow, no matter what happens in Congress.

To be sure, the health reform debate has been lethal for M&A activity among providers and Big Insurers, 2 areas that had been hot beds of such activity in years past. And most small- and medium-sized life sciences and biotech companies are on life support, having proven largely unable to secure financing for their risky bets on future drugs.

Nevertheless, Dealogic reports there have been 707 deals in the sector so far this year, a bit higher than last year. Other perennially strong sectors like energy, tech and telecommunications have experienced substantial drops over the same period.

And in the food and beverage sector–which has been plagued by US consumers’ quirky new tendency to save money–deal volume is off 82% compared to a year ago.


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