THIRD QUARTER MERGER AND ACQUISITION ACTIVITY IN HEALTH CARE SERVICES AT LOWEST LEVEL IN TWO YEARS According to Irving Levin Associates, Inc.

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Sanford B. Steever, Editor
Phone: (800) 248-1668
Fax: (203) 846-8300
pressreleases@levinassociates.com
THIRD QUARTER MERGER AND ACQUISITION ACTIVITY IN HEALTH CARE SERVICES AT LOWEST LEVEL IN TWO YEARS According to Irving Levin Associates, Inc.
(November 4, 1998 – New Canaan, Connecticut)—Irving Levin Associates, Inc. has just released the preliminary results of the Firm’s 1998 third quarter report on the merger and acquisition market in the health care services industry, available in middle November.
According to The Health Care Merger & Acquisition Report, there were 265 transactions which were publicly announced during the third quarter ended September 30, 1998, down 16.7% from the previous quarter’s 318 deals. The Physician Medical Group, Hospital and Long-Term Care sectors together account for 46.4% of all the deals transacted. The breakout of transactions by sector and the percentage change from the previous quarter are given in the table below:
SUMMARY OF HEALTH CARE TRANSACTIONS
(By Sector, Number of Transactions, Percentage Change)
Sector
Transactions
Change
Physician Medical Groups
57
-25.0%
Hospitals
35
-32.7%
Long-Term Care
31
-26.2%
HMOs
19
+58.3%
Laboratories/MRI?Dialysis
19
-29.6%
Home Health
15
-50.0%
Psychiatric
12
   0.0%
Rehabilitation
7
-53.3%
Other
70
+34.6%
Total
265
-16.7%
“The turmoil in the stock markets during the past few months has taken its toll on the health care services merger and acquisition market,” said Stephen M. Monroe, a partner at Irving Levin Associates, Inc. “Depressed stock prices among publicly traded health care payors and providers have brought the IPO market to its knees and devalued the use of stock as an acquisition currency.”
This is the lowest level of merger and acquisition activity since the fourth quarter of 1996, when 254 deals were announced. “Despite the slump in third quarter activity, 1998 remains on track to match 1997’s record-breaking levels, at about 1,200 deals for the year,” noted Sanford Steever, editor of the Report.
Deal volume in the HMO sector rose dramatically. “The sharp increase in consolidation among managed care companies reflects a renewed interest in this industry. As HMOs adjust to the changing reimbursement environment—largely by raising premiums and divesting their Medicare and Medicaid businesses—they are regaining the confidence of investors. This may attract new capital, which would likely lead to growth in the merger and acquisition market,” stated Mr. Steever.
“Given that payors and providers have to work together, the major providers, such as the senior care companies, the hospital management companies and the PPMs, should ultimately benefit from the renewed investor interest in the payors, including increased flows of capital and consolidation activity,” observed Mr. Monroe. “Acquisition activity among ancillary providers such as home health and rehabilitation operators may languish for some time to come,” according to Mr. Monroe. “Until reimbursement issues are settled, the consolidation activity of ancillary providers will lag behind that of the major providers.”
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based research and publishing firm specializing in health care investments. The Firm has 50 years experience in the health care acquisition market. To purchase The Health Care Merger & Acquisition Report, consisting of 12 monthly newsletters and four quarterly supplements, please contact (800) 248-1668. The annual subscription is $1,495.00.
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