The stock market also provided a boost to publicly traded firms, which saw their share prices rise in 2013 alongside the broader market. In addition, pharmaceutical and technology sector firms entered the year with record levels of cash on their balance sheets.
Those two factors, along with low interest rates and a healthy appetite for lending, made it easier for bidders to swallow a large deal with a mixture of cash, stock or debt. But it also drove up price tags for publicly traded targets.
Companies that serve the pharmaceutical sector also contributed to the higher deal value in the fourth quarter. The quarter's largest deal was a cross-border transaction that McKesson Corp., whose core business is in drug distribution, forged with German peer Celesio in a move that would make McKesson a more formidable player in Europe.
The initial price tag on the deal was 23 euros per share, or about $8.3 billion, using the exchange rate at the time the transaction was announced in October. As of mid-January, it had been raised to 23.50 euros per share to appease hedge fund Elliott Management Corp., Celesio's largest investor. But the deal is in limbo as Celesio's shareholders failed to approve it by the necessary 75% margin.
Private equity firms also saw opportunities in contract research and manufacturing—picking up a theme from earlier in the year. Most notably, JLL Partners teamed up with Royal DSM, a firm based in the Netherlands, to combine their drug development and manufacturing assets into joint venture NewCo with an enterprise value of $1.95 billion.
Outside of the life sciences, a number of deals in the fourth quarter focused on how to bring healthcare closer to patients—particularly as payers and providers are taking on more financial risk for poor outcomes.
Following similar deals earlier in the year, Centene Corp., a Medicaid managed-care organization, scooped up a 68% stake in U.S. Medical Management. The $200 million deal gives it greater in-home care-management capabilities, which will be key to holding down costs for high-risk, chronically ill patients.
CVS Caremark Corp. also forged a $2.1 billion deal to buy Coram, an in-home specialty infusion provider. The retail pharmacy chain already has an urgent-care business through its in-store MinuteClinics, but the Coram purchase allows it to connect with patients at another access point.