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After Effects of Recession in the Healthcare Industry - What is in store for the Investors?
Frost & Sullivan, July 2011, Pages: 54
This study helps the investor by providing a quantitative overview of the historical trends in macro economic scenario that helped shape the healthcare industry. It also provides a snapshot of mergers and acquisitions in the healthcare industry classified by time, segments, deal volume, average deal size, diversification by geographies, types of integration and deal multiples.
Objective
This study focuses on the global mergers and acquisitions scenario in the healthcare industry. It provides an overview of the various deals in the study period across five major healthcare segments. Deals have been analyzed using different parameters to facilitate comparison. The effects of recession, government mandates and legislations and their impact on the healthcare industry have been analyzed.
Healthcare Segments Covered
- Biotechnology
- Healthcare Equipment and Supplies
- Healthcare Providers and Services
- Hospitals
- Pharmaceuticals
Assumptions and Limitations
- Only deals that have disclosed deal value are considered.
- All analysis are done for closed mergers and acquisition deals only.
- Deals with a deal value of less than 50 million are excluded to facilitate comparison.
- Deals where the ‘target’ is into healthcare are only considered.
- As deals are based on information from secondary sources, only those deals that are available in the public domain are considered; hence the list of deals, while indicative, may not be exhaustive.
Introduction: Mergers and Acquisitions was on a rebound in 2010 shaped by multiple factors ranging from the Healthcare Reform Act to Medical Tourism
The Patient Protection and Affordable Care Act
It is a mixed bag with respect to the Health Reform Act. In the United States, healthcare participants across the value chain are looking at operational efficiencies as the Act is expected to have an effect on healthcare providers, payers and device companies. Consolidation, through merger and acquisition or joint venture is considered the way forward for companies that are likely to be affected by this Act.
Medical Tourism
Escalating medical costs in the West have always been a cause for concern. One beneficiary of this trend is the medical tourism industry. With a majority of medical tourism revolving around dental and cosmetic care, this sector was also not spared from recession. The year 2010 saw a comeback as tourists resumed their visits outside their home geography/to other countries for these procedures and also treating it as a short vacation. This rebound in medical tourism saw hospitals enter into alliances with their counterparts across the world to more effectively manage the patients.
Developing World and Healthcare
While the Americas and Europe have been considered as the innovation hub, 2009-2010 saw an interesting trend toward movement of healthcare activities to the developing regions across the globe. Historical double digit growth rates, lower costs, and significantly lesser barriers to entry are contributing factors to a gradual shift to the developing countries.
Lifestyle Diseases and Healthcare
Healthcare sector is undergoing a sea change across the globe as countries, especially the United States and European countries battle with aging baby boomers. Countries in the developing world are affected by chronic diseases and other epidemic. Healthcare costs are increasing and governments are reining in costs to combat budget deficits. The aforesaid two factors are contributing to the consolidation in this industry.
Financing Mergers and Acquisition
Although experts believe that the worst recession is finally over, global economies are still battling with the after effects. Healthcare sector, despite being one of the last sectors to bear the brunt/be affected by the recession, has taken a hit on multiples, and general availability of funds. Global IPO meltdown and tightening credit lines were the biggest challenges facing healthcare. 2010 saw an improvement in this trend, as M&A improved and companies were more willing to look at expansion plans.
RESEARCH OBJECTIVE AND SCOPE
INTRODUCTION
GEOGRAPHY ANALYSIS
Deal Volume Across Target and Acquiring Geographies
Classification by Deal Volume across Deal Multiples
SEGMENT ANALYSIS
Comparison of Number of Deals across Segments and Target Geographies
Comparison of Number of Deals across Segments
Comparison of Number of Deals across Segments (North America)
Comparison by Average Deal Size
Comparison by Average Deal Size and Target Geographies
Deal Volume Classification by Segments and Deal Multiples
Key Takeaways based on Deal Count and Average Deal Size across Various Segments
Classification by Deal Value and Proportionate Deal Ranges
Classification by Type of Acquisition and Deal Count
Classification by Type of Acquisition and Deal Value
Classification by Geographies and Proportionate Deal Ranges
Classification by Number of Deals and Type of Ownership
ANALYSIS BY TYPE OF ACQUISITION
Analysis by Number of Deals and Type of Ownership
Analysis by Deal Value and Type of Ownership
Analysis across Segments, Average Deal Size and Number of Deals
Classification by Deal Multiple and Deal Volume
ANALYSIS BY TIME
Classification by Deal Volume and Deal Ranges across Types of Acquisition
Classification by Deal Multiples and Number of Deals
ANALYSIS BY DEAL RANGES & TYPE OF OWNERSHIP
Classification by Deal Multiples and Average Deal Size
Comparison Across Number of Deals and Years
Classification by Deal Value to Sales, Average Deal Size
CONCLUSION AND STRATEGIC RECOMMENDATIONS
Key Factors Influencing the Mergers and Acquisition Market
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