Strong Momentum in Healthcare: Trends in Mergers and Acquisitions

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OVERVIEW Silicon Valley Bank, financial partner to technology and life science companies and their investors worldwide, publishes an annual healthcare report that examines the merger and acquisition behavior of private, venture capital-backed biotech and medical device companies. Among the findings: • 38 Big Exits in 2012 -- 8 year high • Estimated $16 billion in payouts to investors in private Big Exit M&A in last three years • 44% of achievable milestones hit in structured biotech and device deals Based on an analysis of private merger or acquisition transactions of U.S.-based, venture capital-backed companies between 2005 and 2012, Silicon Valley Bank found continued growth in the number of “Big Exits” among biotech, healthcare services and medical device companies. Big Exits were defined as acquisitions where the upfront payment totaled in excess of $50 million for device and service companies and $75 million for biotech companies. “For the second year in a row, we saw the most VC-backed big exits in healthcare, generating significant liquidity,” said Jonathan Norris, Managing Director with Silicon Valley Bank and author of the report. “We think strong M&A numbers will continue in 2013. Coupled with an impending decrease in venture capital investment in the healthcare sector and a strong biotech IPO market, we expect positive future returns for firms that have capital to deploy.” The study reveals that despite the strong environment for big exits, healthcare Series A investment is on the decline. Investment is substantially down in medical device Series A year over year; however, biotech stays steady during that time, in large part due to the significant investing activity of corporate venture capital in 2012. Corporate Venture was part of the investor syndicate in 30% of all biotech Series A equity financings last year, twice that of previous two years signaling corporate interest in this sector. Silicon Valley Bank works with 50 percent of healthcare-focused venture capital firms and venture-backed companies nationwide, specializing in biotech, medical device and healthcare services.

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