In response to Shawn Rhea's "Siemens to acquire Dade Behring in $7 billion deal":
The recent wild gyrations in the Dow Jones have jeopardized several large mergers and acquisitions deals and severely depressed the stock of a number of leveraged buyout firms.
Given these conditions, it was interesting to note that in the acquisition of Dade Behring Holdings by Siemens Medical Solutions, the purchaser paid a healthy 20% premium over the current stock price.
Since the market instability of the past few days has knocked out a few very large M&A deals in other industries, some people are asking whether the wobbly Dow Jones will put an overall damper on the current boom in healthcare information technology mergers.
It probably will not. The small to midsize healthcare M&A market will not be materially affected in the short term by this recent development, primarily because these smaller companies are generally the target of the strategic buyer. These industry players are not relying on a large amount of leverage to provide their returns like the private-equity players. They are, instead, looking to enhance their current product suite in order to make them a more competitive solution or a one-stop shop for their customers.
Longer term, however, if the market jitters continue, the buying companies may be somewhat hesitant to use their own stock as the currency for an acquisition if they have had significant price erosion. If it is a smaller acquisition, the buyer will simply use cash and may be able to make some acquisitions at a bit of a lower multiple than today.
Dave KauppiPresidentMidMarket CapitalChicago To submit a letter to YOUR VIEWS, click here. Please include your name, title and hometown.