Q3’13 – Healthcare M&A Roundup

OCT 14

For Q3’13, TripleTree tracked 364 healthcare mergers and acquisitions with a total and median enterprise value of $43.9 billion and $21.9 million, respectively. Healthcare M&A deal volume increased 28% Q/Q. However, with the median enterprise value decreasing from $43.0 million in Q2 to $21.9 million in Q3, total deal value decreased 12% Q/Q.




Deal volume was distributed across the following sectors:

  • Healthcare Technology:26 transactions
  • Managed Healthcare: 3 transactions
  • Healthcare Facilities: 117 transactions
  • Healthcare Services: 72 transactions
  • Pharmaceuticals: 31 transactions
  • Biotechnology: 27 transactions
  • Life Sciences Tools & Services: 22 transactions
  • Healthcare Supplies: 10 transactions
  • Healthcare Distributors: 15 transactions
  • Healthcare Equipment: 41 transactions

Continuing the trend from 2H’12 and 1H’13, the healthcare facilities subsector had the most transactions (117) for the quarter, with many of the transactions being small, strategic deals. As we have previously opined, healthcare providers are taking on risk through value-based care initiatives and the creation of ACOs. In order for providers to gain negotiating power and thrive in a risk-bearing environment, they need to increase scale and add additional healthcare services, which is driving consolidation in the sector.

There were two noteworthy transactions in the healthcare facilities subsector for Q3:

  • Gentiva Health Services (NASDAQ:GTIV) acquired Harden Healthcare Holdings for $409 million – a more detailed assessment is here.
  • Humana (NYSE:HUM) acquired American Eldercare, a leading provider of long-term care (LTC) services in Florida (terms of the acquisition were not disclosed). The acquisition gives Humana ownership of American Eldercare’s recently awarded LTC managed Medicaid contract in Florida – a contract that provides access to Florida’s statewide LTC population and potentially hundreds of millions of dollars of Medicaid LTC premiums. Through this contract, American Eldercare’s revenue is expected to increase from $75 million today to over $1 billion in 2015. In addition to gaining the leading position in Florida Medicaid LTC, the acquisition gives Humana additional scale and capabilities to support growing duals and Medicaid exposure nationwide. These capabilities include chronic care, behavioral health, and long-term care – all of which are aligned with the needs of the Medicaid and duals populations. As states continue to look for assistance in managing their Medicaid and duals populations, Humana continues to build on its capabilities in government healthcare.

With major U.S. market indices continuing to see gains, healthcare IPO activity in Q3 was strong – 19 healthcare companies had successful IPOs totaling ~$3 billion of transaction value. Two noteworthy IPOs in the quarter were Envision Healthcare Holdings (NYSE:EVHC) and Benefitfocus (NASDAQ:BNFT):

  • On August 13, 2013, Envision raised $966 million by offering 42 million shares at $23/share [press release]. Envision is a provider of ambulance services (currently 37% of revenue) and outsourced physician services (currently 60% of revenue). In addition, the Company recently established its Evolution Health division (currently 3% of revenue), which provides care management services to the post-acute care market. The addition of Evolution enables Envision to manage the patient along the entire care continuum – before, during, and after a hospital stay. The company’s divisions are well positioned to benefit from macro-healthcare industry trends including health insurance coverage expansion, an aging population, and the shift to value-based reimbursement models. Investors have reacted favorably to Envision’s IPO, pushing shares up to $26.03 as of the end of Q3.
  • On September 17, 2013, Benefitfocus raised $131 million by offering ~4.9 million shares at $26.50/share [press release]. The Company provides benefit administration software with employee benefit tracking, private exchange benefit distribution, and data analytics capabilities to payers and employers. We note the transaction for the capabilities Benefitfocus is providing to support health insurance and supplemental benefits distribution, the Company’s leadership position in private health insurance exchanges, and for the public market’s receptivity despite still stabilizing financials. Related to this IPO, TripleTree will cover the topic of private exchanges in a research report that we will be publishing in Q4’13. Benefitfocus’ share price more than doubled in its debut and ended the quarter priced at $49.75/share.

Look for a more comprehensive view of capital markets activity in our Quaterly ValueTracker, due out next week.

Until then, let us know if you have any questions.

Elliot Amundson
Chris Hoffmann
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