After a very strong performance in January 2017 with 160 transactions announced, February’s deal volume collapsed 45%, to just 88 transactions (see chart below). Compared with the same month a year ago, it’s was only down 30%, to 125 deals. Don’t forget, 2016 was a leap year, so an additional six more deals snuck into last year’s results on February 29. What difference that doesn’t make for this year’s results.
Yes, it’s all because of the uncertainty around the fate of the Affordable Care Act. Many of the services sectors will be effected by what becomes of Medicaid, whether states will receive block grants, or some other solution. At least two of the technology sectors, Biotechnology and Pharmaceuticals, will be impacted by whether Congress empowers the CMS to negotiate prices for drugs.
Spending tanked, as well. The preliminary total spending for the month is $8.5 billion. Compared with January 2017’s nearly $44.8 billion, that’s down 81%. The same month in 2016 posted a more modest total of $28.0 billion, which means the year-over-year trend is just down by 70%.
February’s spending was propped up by three billion-dollar-plus deals, with a combined total of $6.2 billion. Those were Allergan‘s (NYSE: AGN) approximately $2.5 billion acquisition of ZELTIQ® Aesthetics (NASDAQ: ZLTQ); Royalty Pharma‘s $2.2 billion bid for the royalties to multiple sclerosis drug Tysabri®, owned by Perrigo (NYSE: PRGO) since its white-knight takeover of Elan Corp.; and Hologic‘s (NASDAQ: HOLX) $1.6 billion deal for Cynosure, Inc. (NASDAQ: CYNO).
It’s too soon to tell whether or how long this state of the market will drag on. Probably as long as the legislative process takes to repeal, replace or repair the ACA. This could be a very quiet year for healthcare mergers and acquisitions.
Check out the full results in the March issue of Health Care M&A News, publishing online by March 9. We’ll keep you posted.
