Second Quarter Merger and Acquisition activity in health care services reaches third-highest level ever According to Irving Levin Associates, Inc.

FOR IMMEDIATE RELEASE
Stephen M. Monroe, Partner
Phone: (800) 248-1668
Fax: (203) 846-8300
pressreleases@levinassociates.com
Second Quarter Merger and Acquisition activity in health care services reaches third-highest level ever According to Irving Levin Associates, Inc.
(July 31, 1997 – New Canaan, Connecticut)—Irving Levin Associates, Inc. has just released the preliminary results of the Firm’s second quarter report on the merger and acquisition market in the health care services industry, available in August.
According to The Health Care Merger & Acquisition Report, there were 270 transactions which were publicly announced during the second quarter ended June 30, 1997, down 14.3% from the previous quarter’s record 315 deals, but still up 14.4% from the 236 deals announced in the second quarter of 1996. Despite this decline, the second quarter’s M&A volume also represents the third most active quarter ever. The breakout of transactions by sector and percentage change over the previous quarter are given in the table below:
SUMMARY OF HEALTH CARE TRANSACTIONS
(By Sector, Number of Transactions, Percentage Change)
Number of
Percentage
Sector
Transactions
Change
Physician Medical Groups
62
-11.4%
Hospitals
51
+15.9%
Home Health
33
-19.5%
Rehabilitation
22
+22.2%
Long-Term Care
22
-18.5%
Laboratories/MRI/Dialysis
20
-31.0%
HMOs
19
+58.3%
Psychiatric
10
-56.5%
Other
31
-39.2%
Total
270
-14.3%
“After breaking all previous records last quarter, the health care merger and acquisition market is taking a breather,” said Stephen M. Monroe, a partner at Irving Levin Associates, Inc. “The rise of the stock market to unprecedented levels has raised the valuations of many target companies, making them more expensive to buy. Even so, large deals are still being done for economic and strategic reasons.”
Both the Hospital and Physician Medical Group sectors continue to perform within previously established ranges, accounting for 42% of all deals announced in the second quarter. “Merger activity among nonprofit hospitals and acquisition by the rapidly growing physician practice management companies, or PPMs, continues to buoy the market,” noted Mr. Monroe.
“The down-turn in the Home Health Care sector likely reflects concern over investigations of the billing practices of some companies. We expect to see continued softness in this sector, and valuation levels will trend downward until reimbursement issues are cleared up,” according to Mr. Monroe.
Activity in the HMO sector rose dramatically as managed care continues to penetrate all areas of health care services. “Coupled with the underlying fragmentation of the industry and the need to control costs, managed care keeps driving consolidation throughout all sectors of the health care services industry,” stated Mr. Monroe.
Even though the second quarter slowed down a little, the merger and acquisition volume in health care services is up 28% for the first half of 1997 compared to the same period last year. “We expect to have a third record year in a row,” stated Mr. Monroe.
Irving Levin Associates, Inc. is a New Canaan, Connecticut-based financial services firm specializing in health care investments. The Firm has nearly 50 years experience in the health care acquisition market. To purchase The Health Care Merger & Acquisition Report, please call (800) 248-1668.
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