Research Preview - Analysis of Mergers and Acquisitions Trends in the United States Healthcare...
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Transcript of Research Preview - Analysis of Mergers and Acquisitions Trends in the United States Healthcare...
US Healthcare Provider M&A Activity Fueled by
Low Margins and High Compliance Costs
Research PREVIEW for the
Analysis of Mergers and Acquisitions Trends in
the United States Healthcare Provider Industry
Objectives of the Study
Key study objectives include:
Source: Frost & Sullivan
To analyze the M&A trends in the US healthcare provider industry
To identify the key M&A trends in the industry based on deals across sectors and the nature of buyers
To conduct a financial analysis of the deals with respect to valuation multiples
To identify, compare, and assess sectors that are current and potential hubs for M&A activity
To arrive at strategic conclusions on the basis of the key trends observed
3
The Full Analysis Features the Following Content
Contents Slide Number
Executive Summary 5
Introduction 7
The Key Rationale for M&A 12
Key M&A Statistics 18
Type of Integration 24
Type of Target 28
Key M&A Metrics 31
Transaction Details 35
Conclusion 47
The Frost & Sullivan Story 50
19
9
17
1
19
2
31
0
39
8
41
8
26
0
0
50
100
150
200
250
300
350
400
450
2007 2008 2009 2010 2011 2012 2013
Dea
l V
olu
me
Year
M&A Deal Trends by Volume
The healthcare provider industry witnessed a marked decrease in the number of M&A deals between 2007
and 2008. The deals plummeted around 15.0% between 2007 and 2008. This outcome is primarily due to
economic recession, which began in 2008. However, when the economy started to show signs of recovery in
2010, the deal-making activities accelerated. The deals increased by 58.5% between 2009 and 2010, which is
the maximum year-on-year increase that had happened in the years included in this study. The legislation of
ACA in 2010 harbingered the increased deal activity and the surge in deal volume continued until 2012. The
deal volume increased from 398 to 418 in 2012. With around 260 closed deals, along with 153 deals
announced, consolidation in the healthcare provider industry is expected to continue in 2013.
Healthcare Provider Industry: Volume of M&A Deals, US, 2007–2013
Source: Capital IQ; Frost & Sullivan
62.0
62.8
73.5
74.8
67.7
74.4
78.8
12.0
16.7
14.5
7.9
15.9
10.9
10.2
14.1
20.5
10.8
12.6
12.9
10.9
9.3
5.4
1.2
2.0
2.0
0.9
6.5
2.6
1.5
1.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2007 2008 2009 2010 2011 2012 2013
De
al V
olu
me
(%
)
Year
< $50.0 M $50.0M-$100.0M $100.0M-$500.0M $500.0M-$1.00B > $1.00B
Percent Volume of M&A Deals by Deal Value Range Analysis
Healthcare Provider Industry: Percent Volume of M&A Deals by Deal Value Range, US, 2007–2013
Source: Capital IQ; Frost & Sullivan
The analysis of deals based on the transaction range clearly indicates that, after the advent of the financial crisis, since 2008 the share of low-value deals (<$50.0M) has increased as a percentage of total deals during the entire study period. This trend is accompanied by a drastic reduction in the high-value deals (> $500.0 M) after the onset of the recession in 2007. The analysis of data through November 14, 2013 revealed that only 2 deals with transaction values of more than $500.0 million occurred. This is drastic fall in comparison with eleven deals that happened in 2007. The outlook of credit ratings for not-for-profit hospitals looked bleak. This makes them less credit worthy, thereby making it difficult for them to access capital. This, along with their declining margins, makes them vulnerable to acquisitions. However, the acquirers, especially the private equity investors, will experience an increase in the cost of capital to fund the transaction. A confluence of these factors has created a trend of increasing low-value deals.
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Research Authors
Dr. E. Saneesh Research Analyst
Business & Financial Services
S. Shrikanth Industry Analyst
Business & Financial Services
Vidya S Nath Research Director
Business & Financial Services
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