For the 2009 third quarter, the health IT markets rallied to post the largest gains in over a decade, leading to the outperformance of stocks in broader markets, according to a transaction report from healthcare advisory company Healthcare Growth Partners (HGP) released this month. In addition, performance was bolstered by 43 mergers and acquisitions during the third quarter.
The third quarter saw an emergence in large mergers and acquisitions being announced or closed, the report noted. The priciest deal for third quarter was reported to be a pending Xerox and Affiliated Computer Services merger. The transaction was announced in late September at a price point of $6.4 billion dollars. Another late September deal came from computer juggernaut Dell’s announcement to target IT services provider Perot Systems. This acquisition, also still pending, is valued at $3.9 billion dollars.
The total number of third quarter health IT mergers and acquisitions was 43 with a total deal value at $14.39 billion dollars. The average deal value was $1.03 billion, with the median value at $11 million.
However, the overall number of U.S. mergers and acquisitions fell 61 percent to $103.9 billion from $270.2 billion a year earlier.
U.S. mergers and acquisitions volume dropped 30 percent; global mergers and acquisitions volume dropped 20 percent. This figure marks the eighth consecutive quarter of declines and a decline of 43 percent from the second quarter. Healthcare was the most active sector, making up 32 percent of deal volume.
Through the third quarter, the Elmhurst, Ill.-based HGP noted that the health IT index gained more than 40 percent whereas Standard & Poor’s (S &P) 500 gained 17 percent. The dollar weakness continued due to inflation concerns with 4.1 percent against the Euro. These figures signify a trend in the third quarter toward small deals, said the report.
While the health IT markets are slowly rebounding, the report suggested that health IT mergers and acquisitions likely bottomed out in the second quarter and third quarter. HGP believes mergers and acquisitions should accelerate as vendors look to augment growth to meet high Wall Street and investor expectations.
The report stated that the American Recovery and Reinvestment Act (ARRA) has partly driven healthcare IT public equities to reach all-time highs. Two public offerings were announced with a total deal value of $554 million. This is a sharp increase from the second quarter’s $127 million from its two completed public offerings.
HGP’s report stated that health IT companies, predominantly revenue cycle vendors, are taking advantage of the rich variations of pubic equities. The total number of private investments in public equity deals was 30 with a total deal value of $190 million and an average deal value of $8 million.