Health Care M&A - products.levinassociates.com

1 Volume 18, Issue 12. Health Care M&A. December 2013. NEWS. Inside the Health Care M&A Market INSIDE THIS ISSUE What Happened, What's Next M&A Activity in 2013 and Expectations for 2014, Part I. M&A in November W. Deal volume didn't rival the high ith 13 sectors of the Health Behavioral Health Care seldom point of October, but the preliminary care industry to cover, it's makes M&A news, in part because so read on November's deal value is an impressive $ billion, higher than tough to do each one justice many facilities are privately owned, the previous month's total. See which in every issue. This month we asked and their owners don't publicize their sectors gained momentum as we head some analysts to talk about the most deals. One group that entered the field into 2014.

2 Page 19 significant trends they saw emerge this year was Bregal Partners, with its this year, and what they think it means purchase of US Community Behav- .. for M&A in 2014 and beyond. Here are their views on what's in store in ioral LLC in September. Behavioral Health Group acquired four opioid Departments Behavioral Health Care, eHealth, treatment programs. On the public home Health & Hospice, Medical De- side, Acadia Healthcare (NASDAQ: Technology vices, Physician Medical Groups and ACHC) continued its acquisition spree, Rehabilitation. Next month, we will with three deals announced for four Deal Summaries Page 4 cover the remaining sectors, including facilities. Universal Health Systems Additional Transactions Page 7 Biotechnology, Hospitals, Long-Term (NYSE: UHS) did not announce any Health Care Technology Page 10.

3 Care and Pharmaceuticals. deals in this sector during the year. Services (continued on page 2). Deal Summaries Page 12. Additional Transactions Health Care Services Page 14. Page 15 Billion-Dollar Deals Go Big Deal Value Grows As Deal Volume Stays Steady T. To Our Readers he year isn't over yet, but we the billion-plus mark, virtually even Your input is needed! We are evaluating the editiorial content of this can already see some trends with last year's total of 31 (we're still newsletter, from stories to deal sum- as we look back at the year's expecting at least one more major an- maries. In order to build a product that better serves your needs, we ask you largest deals and the busiest acquirers. nouncement in December.) However, to share your thoughts and opinions.

4 The re-emergence of big deals in the 2012 wasn't a banner year for billion- Hospital sector is one, while the dearth dollar deals. Even 2011 had 34 deals What departments do you read most often? What elements could you of big deals in the digital eHealth sector top the billion-dollar mark, so this do without? What topics would you is another. Managed Care deals disap- year's Big Deal volume isn't one for like to see explored in future issues? peared from the billion-dollar level, as We're listening. the record books. payors digested the big deals they made Please send your thoughtful and in 2012. Big Pharmaceutical deals rose Big deal value made a strong considered feedback to our editor at Also, to 11, from eight a year ago. comeback in 2013, happily.

5 Our pre- please include Feedback in the sub- liminary total for the year's largest ject line, so we don't miss it. Through the first week of De- deals is about $111 billion, up 26%. cember, 30 deals reached or exceeded (continued on page 9). HealthCareMandA Page 2 Health Care M&A News December 2013. (continued from page 1) paid $644 million for Greenway Medical Technologies There's a great deal of interest in behavioral Health (NYSE: GWAY), a single-database electronic Health re- in the private equity area, said Andy Cowherd, managing cord, practice management and interoperability solution director at Mesirow Financial. Not enough deals, too platform. many investors. One factor behind that avid interest, he noted, is that much of the business is private pay, and not Don't expect a lot of M&A action on the EMR front, tied to federal reimbursement.

6 We expect M&A activity according to Berkery Noyes managing director Tom to continue its quiet momentum through 2014. O'Connor. It doesn't make a lot of sense for one EMR. company to buy another EMR company. Epic Systems The eHealth sector seems to be in constant motion, and Cerner (NASDAQ: CERN) and others are taking thanks to its reliance on technology. There's so much space market share in the space. From a deal perspective, you'll between its elements, from electronic medical records and continue to see consolidation in the sector. Any company mobile Health to Big Data and wearable Health tracking of scale that is doing something really well, there will devices (also called the quantified self ), that the deals be acquisitions.

7 A lot of small players will go away in a announced this year are hard to put together to form a couple of years. The experian /Passport Health deal was cohesive picture. an exception. There aren't new independents to buy.. For example, the largest deal announced in this Then there is mobile Health , most often thought of sector was experian plc's (LSE: EXPN) $850 million as mobile Health apps. The number of healthcare apps acquisition of Passport Health Communications, a data in Apple's (NASDAQ: AAPL) App Store is reportedly analytics and revenue management company. In Septem- more than 40,000, and 16,000 of those have clinical ap- ber, private equity-owned Vitera Healthcare Solutions plications, providing disease management services and tracking adherence, said Mesirow's Cowherd.

8 Mobile Health Care M&A News Health is exploding, if you look at the venture capital and ISSN#: 1091-9716 private equity investment statistics for this year. It's hard Published by: to value these companies in many cases because they Irving Levin Associates, Inc. have great ideas, but they don't have much in the way of 268-1/2 Main Avenue revenues yet.. Norwalk, CT 06851. 800-248-1668 (Phone). 203-846-8300 (Fax) Still, healthcare IT companies' valuations have held up, he added, historically three to four times revenues for small- to medium-sized healthcare IT companies. We represented a healthcare IT company earlier this year that Publisher: Eleanor B. Meredith sold for six times revenues. The buyer was willing to pay Editor: Lisa E.

9 Phillips a premium to make sure the deal happened, because he Managing Editor: Stephen M. Monroe wanted the product and he wanted to keep his competitors Research: Jon Espeland from getting it.. Advertising: Jeanne Aloi More M&A action could be stirred up due to the Annual subscription rate: $2,497 looming implementation deadline for ICD-10 (Interna- (Includes 50 weekly email bulletins, four quarterly supplements and special database access) tional Classification of Diseases, 10th edition), slated to Copyright 2013 Irving Levin Associates, Inc. take place on October 1, 2014. That's when healthcare All rights reserved. Reproduction or quotation in whole providers and payors switch from the 40-year-old ICD-9. or part without permission is forbidden.

10 System, which encompasses roughly 7,000 codes, to one that employs more than 70,000. This publication is not a complete analysis of every material fact regarding any company, industry or security. Opinions expressed are subject to change without notice. Statements of fact have been ICD-10 is coming, and you'll see a lot of activity obtained from sources considered reliable but no representation is around that. The provider side is woefully unprepared, . made as to their completeness or accuracy. POSTMASTER: Please O'Connor said. Providers will probably outsource, or send address changes to Health Care M&A News, 268-1/2 Main bring in training companies. ICD-10 players have been Avenue, Norwalk, CT 06851. HealthCareMandA December 2013 Health Care M&A News Page 3.