However, small bolt-on deals were still the most prevalent, with 67.3% of second-quarter transactions clocking in below the $50 million mark.
Within the healthcare industry, vendors once again represented the most active deal-making sector, with vendor acquisitions accounting for 62.6% of all deals in the second quarter, compared with 52.7% during the second quarter of 2011.
However, the 201 vendor deals made up only $14.2 billion of the disclosed value of all second-quarter transactions.
Private-equity and venture-capital firms were the acquirers in nearly three-quarters of deals involving vendors, and 13 out of the 15 largest deals in the sector involved a financial bidder.
Investors on the whole, however, completed 26.4% fewer deals in healthcare than they did the previous quarter. Still, they followed the trend of strategic buyers, with disclosed deal values climbing 101.4% to $4.1 billion.
Deals in the pharmaceutical, biotechnology and life sciences sector represented the largest share of healthcare deal value, at $18.1 billion, even though they accounted for just 24.9% of second quarter transactions.
Healthcare providers came in second, contributing $17 billion to the quarter's total disclosed deal value—up from just $1.8 billion in the first quarter of the year. Providers also completed the second quarter's largest deal: Walgreen Co.'s $6.6 billion purchase of Alliance Boots.
Yet providers saw a temporary lull in deal-making activity as they digested previous buys, according to the report. Deal volume in the second quarter fell 32.1% compared with the previous quarter.
The report noted that deals for nursing homes, home care and rehabilitation centers took a particular hit, with deal volume falling 50% in the second quarter compared with the first three months of the year.
However, the U.S. Supreme Court's decision largely upholding the healthcare reform law—which removed some uncertainty for the sector—is expected to rev up provider transactions in the coming months. The report noted that ancillary providers such as post-acute care and home health companies are expected to be in particular demand as hospitals seek to diversify services, reduce readmissions and improve quality.
In a separate survey conducted by MX.com on behalf of Modern Healthcare, nearly 15% of the 287 healthcare executives surveyed said their organization was likely to get acquired in the next six to 12 months. About 14% said their organizations will be making an acquisition in that time frame. Another 5% said their organizations would be seeking a capital partnership.
Like the three other healthcare segments, payers also slowed their deal-making activity, with transactions dropping 36.4%, with just seven announced deals in the second quarter. However, deal value was four-times higher at $1.2 billion.
The report suggested that payers are still weighing the impact of the Patient Protection and Affordable Care Act and how it will affect their pricing, product mix and distribution channels.
However, it noted that health insurance companies have already moved ahead in creating accountable care organizations, with 221 now set up in 45 states. Those networks are likely to yield more mergers and other alliances, especially between payers and providers, the report said.
It also anticipated an increase in deals that respond to the growth in the dual-eligible market, as the government looks to move more Medicaid patients to private managed-care plans. Those companies will serve as targets for insurers seeking to tap into the lucrative market, the report stated, citing McLaren Health Plan's April acquisition of CareSource Michigan as an example.
The report was produced by Modern Healthcare Insights, the publication's research division.
It was sponsored by Waller, a Nashville-based healthcare law firm. Per Modern Healthcare policy, sponsors are not involved in the development or publication of independent research.
For more information on Healthcare M&A Watch, visit modernhealthcare.com/MA-Watch.