Healthcare mergers and acquisitions hit seven-year low

For the past four years, the volume of healthcare services mergers and acquisitions has always slowed in the fourth quarter. While the fourth quarter of 2000 was no exception, the size of the decline was larger than usual and the number of transactions fell below 100, hitting a seven-year low, according to New Canaan, CT-based Irving Levin Associates Inc. In its fourth quarter 2000 Healthcare M&A Report, the firm points out that there were just 90 healthcare services mergers and acquisitions announced, representing a 30% decline from the third quarter and a 43% plunge from the fourth quarter of 1999.

"During a year of bankruptcies, a volatile stock market and new reimbursement methodologies for Medicare, the healthcare services M&A market took a beating," noted Stephen M. Monroe, a partner and managing editor at the firm. However, during the fourth quarter of 2000, the firm began tracking the merger activity in the healthcare technology sectors, which include e-health, medical devices, biotechnology and pharmaceuticals. "With 144 transactions during the quarter, the healthcare technology area is definitely dominating the merger and acquisition market and commanding the attention of investors," Monroe added. The dollar volume of all healthcare-related mergers and acquisitions announced during the fourth quarter was approximately $26 billion, of which almost 85% was in the healthcare technology areas.

The services sector has suffered from the financial distress in the physician medical group, home health and long-term care components of the healthcare market. "Three years ago, there were up to 80 transactions in the physician medical group practice market in one quarter, compared to just eight in the fourth quarter of 2000. Although not as severe, similar declines have occurred in the home health and long-term care segments," said Sanford B. Steever, editor of the report. "With hospital stocks rising throughout 2000, that market has been relatively active, culminating in Triad Hospitals' $2.4 billion offer for Quorum Health Group in the fourth quarter." PR