Q2 2013 Private Equity Industry Trends

August 13, 2013 12:17 by Clayton Reeves in Capital Markets, Healthcare, M&A, Private Equity  //  Tags: , , ,   //   Comments (0)
McGladrey and PitchBook have reported private equity activity broken down into four sectors: business products & services, consumer products, health care and information technology. B2B: This industry continued to slow down in Q2 2013, with only 95 PE deals completed, totaling $11.0 billion. To put this into perspective, these are some of the lowest numbers in the last decade. Consumer Products: Continuing the trend from B2B, consumer products also slowed to the pace of frozen molasses, with PE completing just 64 deals during Q2.  Again, for perspective, this is the lowest quarterly total in more than a decade. Like other parts of the M&A market, the dollar amount ($31.2 billion) doesn't look too bad until you take out the megadeal for Heinz ($23.2 billion). Health Care: In an industry that has been expected to provide high deal flow, health care failed to live up to the hype.  PE managed only $4.1 billion of investment across 37 transactions. This proved to be the slowest quarter for deal flow since Q3 2009. Information Technology: Breaking the negative trend in PE activity, IT saw an increase in deals from Q1. Private equity invested $12.5 billion across 65 deals in Q2, which is similar to quarterly activity for the last couple years. So, what do these trends indicate for the broader M&A market?  It means that while PE still has considerable dry powder, this remains a seller's market.  Quality companies with earnings growth are hard to find, and when they decide to sell they are able to demand a high multiple.  So far, buyers have been patient, but eventually someone will have to flinch.  Either sellers will need to lower price expectations, or buyers will need to increase their price expectations for high quality targets.  If this doesn't happen, expect continued sluggishness. Click here to read the industry reports.

Healthcare IT the Most Active M&A Market Over First Half 2013

July 23, 2013 10:33 by Clayton Reeves in Capital Markets, Healthcare, M&A  //  Tags: , , , , ,   //   Comments (0)
Berkery Noyes Investment Bankers, a bank with a large research focus, has reported that Healthcare IT was the most active place to find M&A transactions in the first half of 2013. According to the report, Healthcare IT accounted for 63 percent of transactions and 40 percent of total mergers and acquisitions volume during that time frame.  Deal value was estimated at $8 billion.  One of the biggest dealmakers was Constellation Software, who purchased QuadraMed Corp., QMS Inc. and Club Solutions, just to name a few. As we move towards EMR/EHR adoption, the industry will most likely continue to see consolidation.  The technologies required to meet the meaningful use requirements set forth by the government can be complex and are coveted by large players.  Driving the point home, only 42 percent of hospitals report that they have met Meaningful Use Stage 1 requirements, while only 5 percent can boast Stage 2 compliance.  Look for more activity across the Healthcare sector in the coming years. Click to read the entire article here.

Tenet Announces Acquisition of Vanguard

June 25, 2013 12:58 by Clayton Reeves in Capital Markets, Healthcare, M&A  //  Tags:   //   Comments (0)
Tenet has announced that they will acquire Vanguard Health Systems in a deal valued at $4.3 billion including the assumption of $2.5 billion in Vanguard debt. The deal is expected to close by the end of this year. Tenet anticipates annual synergies between $100-200 million. The offer price of $21 represents a 70% premium to Friday's closing price of $12.37 a share. The combined entity would form the second largest for-profit hospital in the country. The transaction will be financed by BoA, including a recapitalization of the existing Vanguard debt at attractive rates. (Reuters) The EV/EBITDA multiple came in at ~11.6x, using March '12-13 numbers (Yahoo! Finance), which is higher than the 8x EBITDA that many hospitals are trading at.  Healthcare continues to be a hotbed for acquisitions, as large players like Tenet expand aggressively. According to Healthcare Daily, Greg Koonsman, a senior partner at VMG Health in Dallas, recently said that “systems offensively and defensively are getting bigger. There is a lot of vertical integration. It’s Business 101. They are getting bigger at any cost... There is a lot of capital chasing few sellers right now. However, about 2,000 (of the nation’s 5,300 hospitals) should be for sale.” Looks like we will continue to see activity in the healthcare sector.

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