M&A Update | Healthcare

M&A activity There were 247 reported M&A transactions that closed during Q1-2018, down from 264 transactions during the fourth quarter of 2017 (Q4-2017). Reported closed transactions in Q1-2018 decreased 20.3 percent compared to 310 closed deals for the same period in 2017. The aggregate deal value of the closed M&A transactions with reported values was $35.9 billion during Q1-2018. This is a decrease from the total reported deal value of $68.8 billion in Q4-2017. We note that quarters with peak values were driven by large individual transactions that closed during each respective period, such as the first quarter of 2015. Additionally, the first quarter of 2017 included the $30.0 billion acquisition of St. Jude Medical by Abbott Laboratories, while the second quarter of 2017 did not have any closed transactions with reported values above $2.5 billion. The third quarter of 2017 included six closed transactions with reported values above $2.0 billion, which includes the $9.1 billion acquisition of VCA Inc. by Mars, Incorporated. Q4-2017 included five closed transactions with reported values above $2.0 billion, which includes the $25.8 billion acquisition of C.R. Bard, Inc. by Becton, Dickinson and Company. Q1-2018 included the $9.3 billion acquisition of Juno Therapeutics, Inc. by Celgene Corporation and the $11.5 billion acquisition of Bioverativ Inc. by Sanofi.

Table 6: Quarterly U.S. healthcare M&A activity for transactions closed Aggregate transaction value and number of deals

Number of Deals

$160

100 150 200 250 300 350 400 450 500

$137.6

$140

$120

$100

$90.8

$79.9 $76.7

$79.2

$80

$71.7

$68.8

$67.2

$54.2

$60

$49.6

$38.0 $42.7

$35.9

$40

$28.8

Number of Deals

$18.8

$15.0

$20

0 50

$0 Aggregate Transaction Value ($BB)

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

As detailed in Table 7 and Table 8, the closed Q1-2018 transactions with reported deal multiples 1 had higher median revenue and higher median EBITDA multiples than the historic median multiples.

Table 7: Quarterly M&A TEV / revenue multiples

Table 8: Quarterly M&A TEV / EBITDA multiples

Median 12.0x

Median 2.5x

3.2

3.0 2.9

3.0 3.3

16.8

16.4

2.9

2.7

15.2

14.3

2.5

2.5 2.4 2.3

2.4

13.5

2.2

12.5 12.3

12.4

11.8

11.2

10.1

10.1 10.3

9.8

1.6 1.6 1.4

6.5

6.0

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Source: S&P Capital IQ and Baker Tilly Capital research (April 2018) 1 14 revenue multiples and nine EBITDA multiples reported

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