Medical Equipment Quarterly Deals Analysis: M&A and Investments Trends - Q1 2010

Medical Equipment Quarterly Deals Analysis: M&A and Investments Trends - Q1 2010

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GlobalData's "Medical Equipment Quarterly Deals Analysis M&A and Investments Trends - Q1 2010" report is an essential source of data and trend analysis on the Mergers and Acquisitions (M&As) and financing in the medical equipment market. The report provides detailed information on M&As, equity/debt offerings, Private Equity (PE), venture financing and partnership transactions registered in the medical equipment industry in Q1 2010. The report gives detailed comparative data on the number of deals and their value in the last five quarters, subdivided by deal types, segments and geographies. Additionally, the report provides information on the top PE, Venture Capital (VC) and advisory firms in the medical equipment industry.

Data presented in this report is derived from GlobalData's proprietary in-house Medical eTrack deals database and primary and secondary research.

M&A Activities Increased In The Medical Equipment Industry In Q1 2010

M&A and asset transactions, which include changes in ownership and control of companies or assets (GlobalData considers this value as not a new investment into the market), witnessed a huge increase, from $4.8 billion in Q4 2009 to $39.8 billion in Q1 2010. However excluding Novartis' agreement to acquire an additional 52% stake in Alcon for $28.1 billion and Merck's agreement to acquire Millipore for $ 7.2 billion in Q1 2010, the industry has seen almost steady investment in the last two quarters, with $4.7 billion in Q4 2009 and $4.8 billion Q1 2010. This signifies that most of the companies are still taking a skeptical approach to the business integration process in the medical equipment market. Further, the number of M&A deals decreased from 141 deals in Q4 2009 to 135 deals in Q1 2010.

In terms of the number of deals, the most active buyers were Inverness Medical Innovations, Inc. with three M&A deals, followed by Thermo Fisher Scientific Inc. with two M&A deals.

The average P/E (Price Earnings Ratio) of acquired medical equipment companies, which reflects the willingness of investors to pay for a company's earnings, increased from 17 times (x) in Q4 2009 to 25x in Q1 2010. This indicates that investors are anticipating higher earnings in the growing medical equipment industry in the short term. Further, the first quarter has seen a considerable increase in the average deal value and median deal value in the medical equipment industry, reporting $1 billion and $93 million respectively in Q1 2010, compared to $98 million and $25 million in Q4 2009. This huge increase in the average deal value can primarily be attributed to Novartis' agreement to acquire an additional 52% stake in Alcon from Nestle for $28.1 billion.

According to Akanksha Jain, Analyst at GlobalData, the increasing M&A trend will continue in the next quarter with the passage of health reform in March. Companies are likely to rethink their strategy and act quickly to counter the burden of 2.3% excise tax in 2013. An improved outlook on capital markets is going to further boost M&A activity over the next quarter.

New Investments In The Medical Equipment Industry Increased By 15% In Q1 2010

Investments in medical equipment companies, including new investment through equity/debt offerings and financings by PE/VC firms reported an increase of 15%, with $15.8 billion in Q1 2010 compared to $13.8 billion in Q4 2009. However, the number of deals decreased from 272 deals in Q4 2009 to 258 deals in Q1 2010. On a year-on-year basis, the market witnessed an increase in the number of deals and a decrease in deal value in Q1 2010, compared to 189 deals worth $25.3 billion in Q1 2009. Overall, the industry is well settled after a lull in the financial market and the trend is moving towards more concentrated efforts on core activities.

GlobalData expects that per capita healthcare expenditures will continue to rise and will benefit the medical equipment industry. In turn, it will enable companies to increase their sales throughout 2010.

Increased Financing Through Debt Offerings In Q1 2010

Debt offerings, including secondary offerings and private debt placements, became the most prominent among all financing activities in the medical equipment market with $12.9 billion raised in Q1 2010 as compared to $8.6 billion in Q4 2009. The change in the investment level can primarily be attributed to the contribution by two major companies in deal making activity in Q1 2010: Novartis' raising of $5 billion through public offerings of senior notes in three separate transactions, and Medtronic's raising of $2.5 billion through public offerings of senior notes in two separate transactions. A weak global equity market coupled with low prevailing interest rates have made debt offerings a lucrative source of funding for medical device companies over the past quarter. Further, the number of debt offering deals decreased from 27 deals in Q4 2009 to 22 deals in Q1 2010.

Additionally, global equity offerings, including Initial Public Offerings (IPOs), secondary offerings, and Private Investment in Public Equities (PIPE), decreased by 49% with $1.3 billion in Q1 2010 compared to $2.5 billion in Q4 2009. The number of deals also decreased from 91 deals in Q4 2009 to 64 deals in Q1 2010. On a year-on-year basis, the number of deals and deal value witnessed a marginal increase, reporting 64 deals worth $1.3 billion in Q1 2010 compared to 55 deals worth $821 million in Q1 2009.

According to Akanksha Jain, Analyst at GlobalData, continued low interest rates and turbulent equity markets have sustained the growth in debt offerings in Q1 2010. Since interest rates are likely to hover slightly below 1% for 2010, debt offerings are likely to remain the preferred mode of raising finance for rest of the year.

New Investment By Venture Capital Firms Increased Marginally In Q1 2010

Medical equipment companies received investments of $1.2 billion in venture financing during Q1 2010, compared to $1.1 billion in Q4 2009. The VC firms are showing much more confidence in start up companies, with over $617.9 million of financing provided in Q1 2010, followed by growth capital/expansion stage companies with $305.5 million. Drug delivery service companies gained the most funding, with $202.5 million raised in 12 deals. In second place, the in vitro diagnostics segment received $167.6 million of VC funding in 31 deals in Q1 2010. Kleiner Perkins Caufield & Byers topped the list of venture financing firms by participating in nine financing rounds for deal value worth $243 million during Q2 2009 - Q1 2010.

Furthermore, the PE market saw a decrease in investments from $1.5 billion in Q4 2009 to $407 million in Q1 2010. The number of deals also decreased marginally from 16 deals in Q4 2009 to 14 deals in Q1 2010.

Investments In Europe And North America Stepped-Up In Q1 2010

The medical equipment industry has seen a rapid increase in investments in the European region, reporting $35.6 billion in Q1 2010 compared to $2.3 billion in Q4 2009. The increase in investment in Europe can primarily be attributed to the landmark deal of Novartis' agreement to acquire an additional 52% stake in Alcon from Nestle for $28.1 billion, and Novartis' three debt offering deals for $5 billion in Q1 2010. In total, Novartis represented almost 93% of the total investment of $35.6 billion in Europe. However, the number of deals decreased marginally from 115 deals in Q4 2009 to 108 deals in Q1 2010.

Further, the North American region also registered an increase in the number of deals and deal value, reporting 418 deals worth $19.8 billion in Q1 2010 compared to 401 deals worth 14.5 billion in Q4 2009, an increase of 37% in terms of deal value. For more details, please vist http://www.reportreserve.com/reportdet.php?company=GlobalData&reportid=10194

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