Healthcare merger and acquisition activity reached a record high last year, despite a dramatic slowdown in the fourth quarter, according to a new report from Irving Levin Associates, New Canaan, Conn.
Healthcare companies recorded 1,183 transactions during 1997, according to Levin. That translates to a 19% increase over the 997 deals announced in 1996 and a whopping 87% jump from the 633 deals of 1995.
"It's been sort of spectacular," said Sanford Steever, editor of Levin's Health Care M&A Monthly.
Although 1997 produced a blockbuster total, fourth-quarter activity actually dropped.
The last three months of 1997 witnessed the announcement of 236 deals, a 23% decline from the 306 deals that were announced in the third quarter. The drop from the fourth quarter of 1996 is less dramatic, however, at 7%.
Steever said he doesn't expect the level of yearly activity to continue to grow by leaps and bounds.
Instead, he expects companies to take time off to integrate the new pieces they've acquired.
"There may be just so much that the market can absorb," Steever said.
For both the fourth quarter and the year, physician medical groups accounted for the lion's share of the business activity (See chart).
Levin recorded 278 deals involving physician groups in 1997, up from 218 in 1996 and 126 in 1995.
A total of 181 deals involved hospital mergers or acquisitions last year, up from 169 in 1996 and 133 in 1995, Levin reported.
Meanwhile, HMO transactions declined to 56 in 1997 from 62 in 1996. In 1995 only 28 deals involved HMOs, Levin said.