Two deals for insurers topped the list of the largest healthcare deals in the quarter. Aetna's $5.6 billion August deal to buy Coventry Health Care was the highest-ranked deal in the M&A Watch. Aetna, based in Hartford, Conn., would expand its reach into serving Medicare and Medicaid beneficiaries with the purchase of Bethesda, Md.-based Coventry if the deal closes, which is expected to happen in the middle of 2013.
Another payer deal was the second-largest in the third quarter, WellPoint's $4.5 billion agreement to purchase Amerigroup, also an insurer active in the Medicare and Medicaid recipient market. Indianapolis-based WellPoint recently got the go-ahead from the U.S. Justice Department to proceed with the deal to purchase Amerigroup after the Virginia Beach, Va.-based insurer agreed to sell its Virginia subsidiary to Inova Health System, Falls Church, Va.
One of the last things needed for that deal to close is an approval hearing to be held by Washington state's Office of the Insurance Commissioner.
Other deals in the Medicare and Medicaid market may be next, according to the M&A Watch report. “Industry experts conclude that small managed-care companies such as Centene, Molina Healthcare and WellCare could be on the radar of major service providers looking to diversify and expand into the Medicare and Medicaid markets,” according to the report. St. Louis-based Centene, Long Beach, Calif.-based Molina and Tampa, Fla.-based WellCare have a strong regional presence in their respective markets and would be attractive to large insurers for the ability to win state and regional contracts.
The M&A Watch report also notes that cross-border transactions compose three of the five largest deals in the quarter, the largest such deal being the $4.4 billion purchase of respiratory care and infusion therapy company Lincare Holdings, Clearwater, Fla., by Munich-based industrial company Linde. That deal closed in August.
Two international drug company deals were ranked fourth and fifth in the quarter in terms of dollar value. GlaxoSmithKline, Brentford, England, closed on a deal in August to buy Human Genome Sciences, Rockville, Md., for $3 billion, and Valeant Pharmaceuticals International, Montreal, agreed to acquire Medicis Pharmaceutical Corp., Scottsdale, Ariz., for $2.4 billion.
Those deals helped drive the pharmaceutical, life sciences and biotechnology category 34.5% higher to 78 in the third quarter from 58 in the second quarter, and was up 39.3% from the 56 deals recorded in the third quarter of 2011.
Even though the total dollar value of deals fell, the number of healthcare deals rose to 350 in the third quarter, up 9% from the 321 deals in the second quarter of 2012 and up 15.1% from the third quarter of 2011. Deal-making climbed in each of the categories for pharmaceutical and related companies, providers and payers, but fell in the largest segment of vendors.
Among providers, the number of deals done rose 25.5% to 69 from 55 in the second quarter, but the third quarter 2012 total was only 4.5% higher than the 66 deals done in the third quarter of 2011.
The number of deals among insurers more than doubled to 15 in the third quarter of this year compared with the previous calendar quarter, in which there were seven deals, according to the M&A Watch. And the number of payer deals rose 36.4% compared with the 11 deals in the third quarter of 2011.
Vendors—historically the largest deal-making segment—held onto the top slot but saw the number of deals fall 6.5% to 188 in the third quarter from 201 deals in the second quarter. That number, though, was 9.9% higher than the 171 deals recorded in the third quarter of 2011.
For more information on Healthcare M&A Watch, visit modernhealthcare.com/ma-watch.