The year got off to a good start, as far as mergers and acquisitions are concerned. Deal volume reached 156 transactions in January, up 19% compared with December 2016, and up 50% over January 2016.
It’s easy to point to the annual J.P. Morgan Healthcare Conference, held in January, as the cause of the sudden boost, particularly in the Biotechnology and eHealth sectors. But the conference didn’t have the same effect last January, when just 104 deals were reported, and those two sectors didn’t see comparable deal volume.
If anything, deal volume might have been expected to decline, considering all the “repeal and replace” talk from the incoming Republican administration. That obviously didn’t sway healthcare deal makers. As of this writing, Congress and the Trump administration have lost some momentum to replace the Affordable Care Act. There’s more talk of “repair” than “replace,” and the timeline on the necessary legislative action has stretched to the end of 2017, and possibly into early 2018, according to President Trump.
Not all sectors experienced an uptick in volume compared with the previous month, and the same time a year ago. The January 2017 results are still preliminary, but the Hospital, Rehabilitation and Pharmaceutical sectors each took double-digit hits, month-over-month. Of course, when a sector’s typical monthly deal volume is in the single digits, the loss or gain of a single deal can appear catastrophic.
Deal value experienced a strong surge in January, up 187% compared with the previous month, to nearly $44.7 billion. In this case, that surge was caused by a single deal, Johnson & Johnson’s (NYSE: JNJ) acquisition of the Swiss biotech, Actelion (SIX: ATLN). The $30.2 billion price tag accounted for 68% of January’s spending total. Without that deal, the monthly total would have been about $14.5 billion and the gains versus previous months would be completely erased.
Billion-dollar deals aren’t unusual on the Technology side, but can be scarce among the Services sectors. This month, the Physician Medical Group sector got the hit, thanks to the continuing consolidation trend. UnitedHealth Group’s (NYSE: UNH) Optum division acquired Surgical Care Affiliates (NASDAQ: SCAI) for nearly $3.3 billion (see story on page 1).
The dermatology sub-sector was particularly active in January, and may be preparing for bigger platform plays. Five deals for dermatology practices were announced by privately owned players such as Anne Arundel Dermatology, a portfolio company of New MainStream Capital, and Platinum Dermatology Partners, a portfolio company of Sterling Partners that was formed in 2016 and is focused on the Texas market. Dallas, Texas-based Dermatology Associates, which was acquired by ABRY Partners in May 2016, is already established in Texas, and has locations in Kansas and Missouri, as well.
2017 has started with a bang, and hopefully won’t end with a whimper. A lot can, and will, happen in the next 11 months. Given the first few tumultuous weeks of Trump’s presidency, we’re betting on a wild ride. □
