Health care reform leads to mergers

Health care reform has caused some unrest in the health care industry but has also led to strong deal-making and mergers.

The Wall Street Journal reports: "Mergers-and-acquisitions activity among U.S. health-care companies, which include a range of categories from drug makers to research labs to insurance companies, is on pace for one of its strongest years." The deals are being driven by two factors: "continued easy access to financing and efforts by health-care companies to find new revenue."

While such activity in the U.S. overall has tumbled, "the value of health-care deals this year is up from 2007 and 2008. Health-care M&A is at an all-time high, both as a percentage of the number of deals and the dollar value of the transactions, according to data provider Dealogic. In part because of two large combinations, nearly 30% of all U.S. mergers so far in 2009 came in health care, based on dollar value. Typically, health care represents 10% of annual deal value, says Dealogic."

Among the major deals this year was Pfizer's announcement in January that it would spend more than $68 billion to buy Wyeth and Merck & Co.'s decision in March to pay $41 billion for Schering-Plough, according to the Journal.

Some buyers "are driven by expectations of new government spending. Health-care technology companies are particularly active, given the belief that the government and hospitals will put more medical records online" (McCracken, 10/20).