As healthcare deals face more scrutiny by state attorneys general and others in their communities, the torrid pace of merger and acquisition activity is beginning to slow.
Dealmakers took a breather in the fourth quarter of 1996, with the number of mergers and acquisitions dropping to 234 from 286 in the previous quarter, according to Irving Levin Associates, a New Caanan, Conn.-based financial services firm.
The fourth quarter activity nevertheless outpaced the year-ago period, when Levin recorded 166 healthcare mergers or acquisitions.
"Deals are taking longer," said Stephen Monroe, a Levin partner. "There's increasing press on these deals and a lot more pressure on boards. The proposed conversion of a nonprofit hospital and the subsequent disposition of its assets now attracts greater regulatory and community scrutiny."
Even with 234 transactions in the fourth quarter ended Dec. 31, the number of deals was still the third largest in the 14 quarters Levin has been tracking the activity.
The hospital sector saw the biggest slide. There were 26 hospital deals during the fourth quarter compared with 59 during the third quarter of last year.
The physician group sector surpassed hospitals with the most action. There were 59 physician transactions during the fourth quarter, down slightly from the 61 deals in the third quarter.
"After breaking records for three consecutive quarters, healthcare mergers and acquisitions have fallen off a bit but it was still a big quarter," Monroe said. "It was still an unprecedented year, and we expect 1997 to be similar."
Levin tracks publicly announced deals and updates its numbers quarterly in case the firm misses transactions announced but not documented in previous quarters.
The only major category that saw an increase in the fourth quarter was the psychiatric field, which recorded 13 transactions compared with nine during the previous quarter.