Summertime typically signals a slow down for mergers and acquisition activity, especially for technology-based businesses. The Nasdaq’s lackluster performance during summer indicates investors tend to ignore this sector in anticipation of the latest technology gadget or new game-changing systems that normally are unveiled as autumn approaches.   However, recent M&A activity impacting information technology (IT) companies servicing the healthcare industry has been far from stagnant.

Healthcare Transaction Activity

The total value of healthcare industry mergers and acquisition transactions within the mid-market as reported by Capital IQ in 2010’s 4^th quarter was not as robust as the 3rd quarter, which is surprising based on our expectations. However, in what is normally a period that sees a fall off from the traditional year-end pickup, transaction activity in 2011‘s 1^st quarter continued at a strong pace.   In fact, the aggregate dollar value of transactions below $1B within the past two quarters ($26BB) nearly equaled the value for similar transactions in all of 2009 ($29BB).

Lately the “L” seems to be missing from LBO’s (leverage buy-outs) as a result of the lack of leverage over the past few years. However the slower mergers & acquisitions activity in the healthcare market first seen in late 2008 has recently improved, undoubtedly partially driven by the renewed health of senior debt lending to support transactions.

Healthcare remains one of the nation’s most vibrant and vigorous sectors, creating some excellent opportunities for mergers and acquisition (M&A) activities.

Florida’s commitment to forming a biotechnology cluster within the state will have significant impact on both the healthcare industry and Florida’s overall economy during the next 10 to 15 years. During the last four years, the state has earmarked nearly $700 million in incentive plans to help attract two of the largest biotechnology research institutes in the world, the Scripps Research Institute and the Burnham Institute.

Prevention versus treatment. One might assume investment dollars flow freely into preventative care based on the overall media coverage. However, having just returned from the largest bio-healthcare conference of the year, I can tell you that investing in treatment (pharmaceuticals, medical devices, health insurance, etc.) is still king and has no near-term threat of being overthrown. Approximately four percent of the $2 trillion spent annually on healthcare is earmarked for prevention. So it is easy to understand the investor focus on treatment.

The current push from business and government to shift healthcare responsibility and costs to individual consumers, often called Consumer Directed Healthcare, is laying the groundwork for the creation of a wide array of new kinds of businesses, services and products, with many health care providers turning to mergers and acquisitions as the fastest way to meet the new demand.