For Q4 ‘14, TripleTree tracked 401 healthcare mergers and acquisitions that either closed or were announced but have yet to close. The 401 deals had total and median enterprise values of $182.3 billion and $42.5 million, respectively.
Quarter over quarter, the volume of M&A activity, as well as the median enterprise value, declined marginally. However, Q4 experienced a 52% increase in aggregate announced and closed transaction value. The resurgence of value is due in part to several notable trades that were announced in Q4, including Actavis plc’s (NYSE:ACT) agreement to acquire Allergan Inc. (NYSE:AGN) for $66 billion, Becton, Dickinson and Company’s (NYSE:BDX) agreement to acquire CareFusion Corporation (NYSE:CFN) for $12.2 billion, Merck & Co. Inc.’s (NYSE:MRK) agreement to acquire Cubist Pharmaceuticals Inc. for $8.4 billion, and Laboratory Corp. of America Holdings’ (NYSE:LH) agreement to acquire Covance Inc. (NYSE:CVD) for $5.6 billion. Adding to the increase in aggregate value are transactions that closed during the quarter that were announced prior to Q3, including Bayer AG’s (DB:BAYN) acquisition of Merck’s Consumer Care Business for $14.2 billion and Eli Lilly and Company’s (NYSE:LLY) acquisition of Novartis Animal Health Inc. for $5.4 billion.
Looking ahead, we expect healthcare M&A activity to remain robust, building on its momentum into 2015 given favorable financing conditions, excess balance sheet cash reserves, and the need for additional strategic investments amidst a shifting regulatory landscape.
Deal Stratification
By our count, closed deal volume was distributed across the following sectors:
- Healthcare Services, Facilities, and Technology: 180 transactions
- Life Sciences Technology and Services: 59 transactions
- Healthcare Equipment and Distribution: 50 transactions
Three Noteworthy M&A Transactions from the Quarter:
- Providence Service Corporation (NASDAQ: PRSC) announced it acquired Matrix Medical Network, a Scottsdale, Arizona-based provider of in-home health assessment and care management services and a portfolio company of Welsh, Carson, Anderson & Stowe, for an aggregate purchase price of $400 million. The purchase price is comprised of $360 million in cash and Providence common stock with a value of $40 million. Matrix provides health risk assessments for Medicare Advantage health plans and risk-bearing providers through a national network of community-based nurse practitioners across 33 states.
- Optum announced it entered into an agreement to buy Alere Health and its subsidiaries for $600 million, a combination that will broaden and strengthen the value Optum provides to health care payers, employers, and states. Alere Health, a division of Alere Inc. (NYSE:ALR), is a provider of condition management, case management, wellbeing, wellness, and women’s and children’s health services. This acquisition closed on 1/09/15
Public Markets
Q4 of 2014 saw 20 IPO transactions across all segments of healthcare, raising nearly $3 billion dollars in proceeds and capping a remarkable year in healthcare IPO activity. In addition, major U.S. stock indices saw strong returns for the quarter, with the S&P 500, Dow Jones Industrial Average, and Nasdaq recording returns of 4.39%, 4.58%, and 5.40%, respectively. TripleTree compared the sectors within healthcare by selecting representative stocks for each healthcare sector index. Four healthcare sector indices outperformed the S&P 500, with only one that underperformed. Healthcare Distribution was the leader of the group in Q4 with a return of 19.1%, followed by Health Insurance and Managed Care, Healthcare Information Technology & Services, Healthcare Delivery, and Pharmaceutical and Life Science Technology & Services with returns of 13.6%, 10.9%, 7.1%, and 3.8%, respectively.
This Q4 Roundup was pulled from our Quarterly MarketInsight, which includes in-depth analysis about related healthcare news and activity during the quarter – it can be downloaded later this week at www.triple-tree.com/research.