Provider deals also are taking longer to close after they're announced, and parties have shown a greater willingness to walk away from a transaction, said Ellen Federman, senior consultant for global M&A services at Towers Watson.
In provider M&A activity, the two largest deals reflected continued interest in the senior housing and care space, which is expected to grow as the U.S. population ages. Brookdale Senior Living, Brentwood, Tenn., spent $1.4 billion, plus the assumption of $1.4 billion in mortgage debt, to acquire Seattle-based Emeritus Corp. and expand into a company with operations in 46 states.
The following month, NorthStar Realty Finance Corp., a New York-based real estate investment trust, spent $1.05 billion on a portfolio of skilled nursing and senior housing properties.
The transactions reflect a growing interest in higher-end facilities that offer a broader range of services in a homelike setting, Gutierrez said.
On the acute-care side, Duke LifePoint Healthcare, Brentwood, Tenn., signed one of its largest deals, committing a half-billion dollars to acquire Conemaugh Health System, a three-hospital group based in Johnstown, Pa.
Higher deal prices wouldn't be possible without the easy access to financing that healthcare companies have enjoyed. For publicly traded acquirers, the bull market helped boost their own share prices as well as the market capitalization of their targets. And both buyers and sellers showed more willingness to accept deals financed with a mixture of stock and cash, rather than demanding all cash, Federman said. “The debt markets and the equity markets are providing currency for deals that we haven't seen since probably the Great Recession,” she said.
Another factor driving up prices is that strategic and financial bidders had to compete against the lure of an initial public offering, as the equity markets handsomely rewarded many companies that chose to go public rather than be acquired.
IMS Health, which provides data and analytics primarily to the pharmaceutical industry, had the second-largest IPO of the quarter when shares sold at $20 to raise $1.3 billion. That valued the company at close to $7 billion.
But the first quarter's most talked-about IPO was Castlight Health, which provides price and quality information to workers in employer health plans. Underwriters for Castlight priced shares at $16, already above the expected $13 to $15 range listed in the IPO prospectus. But on its first day of trading, shares soared as high as $41.95, which had some observers warning of a bubble. The company's shares since have dropped to below $20 as of mid-April.
In total, 34 companies filed a registration statement for an IPO in the first quarter, up from 25 in the fourth quarter of 2013. Smaller pharmaceutical and biotechnology companies, which also flocked to the public markets last year, represented almost two-thirds of the filings.