Q3:14 was a very active quarter for Healthcare M&A with 322 deals announced representing $60.8 billion of deal value. Healthcare services contributed 53% of the deal volume, but only 20% of the combined deal value. The Pharmaceutical sector contributed 21% of deal volume, but with a few mega-mergers in the sector, pharmaceuticals represented 57% of the quarter s overall spending with total deal value of $34.7 billion. Biotech, ehealth, and Medical Devices accounted for the remaining 26% of the deal volume and 23% of the overall spending. Q3:14 Deal Volume 322 transactions in Q3:14. Deal Value $60.8 billion in Q3:14. Healthcare M&A Quarterly KPMG Corporate Finance LLC Long-Term Care The Long-Term Care sector, which is set to have its biggest year ever in M&A, contributed 46% (77 deals) to the healthcare services deal volume in the quarter. The sector has seen heavy M&A activity since Q4:13. Up 17.1 % from Q3:13 Mega Deal: Up 21.0 % from Q3:13 $17.0 Billion acquisition of Sigma-Aldrich Corporation (NasdaqGS:SIAL) by Germany s Merck KGaA (DB:MRK) announced in September 2014. The mega deal demonstrated the continued consolidation of laboratory testing materials manufacturers a reaction to pharmaceutical companies cutting costs by limiting the number of suppliers they use. Chapter 11 Filings remain high in Health Care Services: On a trailing four-quarter average, the percentage of healthcare services Chapter 11 filings has risen from 1.1% to 2.7% between 2010 and 2014, resulting in market consolidation due to distressed investing. Hospital sector Number of reported transactions remained low, with only 9 deals each announced in the second and third quarter of this year. Note: All Q3:14 deal volume and deal value figures exclude the failed acquisition of Shire (NASDAQ:SHPG by AbbVie (NYSE:ABBV). Source: Irving Levin Associates, Inc.
Healthcare Deal Volume Trends Healthcare Services M&A Volume Other Healthcare M&A Volume Long-Term Care 46% Lab, MRI & Dialysis 5% Medical Devices 16% Other Services 21% Managed Care 3% Biotechnology 18% Home Health 8% Rehabilitation 3% E-Health 21% Physician Groups 8% Behavioral Health Care 1% Pharmaceuticals 45% Hospitals 5% Subsector Activity Comparison Healthcare Services 70 60 Deal Volume 50 40 30 20 10 0 Long-term care Physician Groups Home Health Hospitals Lab. MRI & Dialysis Managed Care Rehabilitation Behavioral Health Other services Healthcare Medtech, Pharma and Life Sciences 50 Deal Volume 40 30 20 10 Q3 14 Q2 14 0 E-Health Pharmaceuticals Biotechnology Medical Devices Note: All Q3:14 deal volume and deal value figures exclude the failed acquisition of Shire (NASDAQ:SHPG by AbbVie (NYSE:ABBV).
Selected M&A Activity and Public Comparables Selected US Healthcare M&A Transactions - Q3:14 (US$ in millions) Date Announced Target Target Country/Region Buyer Subsector Implied Value (TEV) 9/23/2014 Springfield Service Corporation United States Conifer Health Solutions, LLC. Healthcare Services TEV / TEV / Revenue EBITDA 235.0 - - 9/17/2014 Community Care Health Network, Inc. United States Providence Service Corp. Healthcare Services 400.0 2.1x 9.2x 9/15/2014 Alere Inc. United States Company Insiders Healthcare Supplies 7,841.4 2.6x 13.8x 9/14/2014 TriZetto Corporation United States Cognizant Technology Solutions Corporation 8/25/2014 Allegro Portfolio United States American Realty Capital Healthcare Trust II Operating Partnership, LP Health Care Technology Healthcare Facilities 2,700.0 - - 172.5 - - 8/4/2014 Symmetry Medical, Inc. United States Tecomet, Inc. Healthcare Equipment 8/1/2014 Avalon Laboratories, LLC United States Nordson Medical Corporation Healthcare Supplies 7/18/2014 Fourteen Skilled Nursing Facilities in the Mid-Atlantic Region United States Formation Capital, L.L.C.; SAFANAD Limited Healthcare Facilities 7/17/2014 Gentiva Health Services Inc. United States Kindred Healthcare (NYSE: KND) Healthcare Services 7/14/2014 NeuroTherm, Inc. United States St. Jude Medical Inc. Healthcare Equipment 439.4 1.1x 8.7x 180.0 - - 150.0 - - 1,791.7 0.9x 11.6x 200.0 - - Selected Public Healthcare Companies (US$ in millions, except per share amounts) Insert Company CIQ Company Name Market Cap Latest Twelve Months (LTM) Value (1) Share Price (2) % of 52- Wk High Revenue 1yr Rev. EBITDA Grow th EBITDA (3) Margin Value LTM LTM Revenue EBITDA Ambulatory Surgery AMSG Am Surg Corp. 2,412 4,633 50.11 92.0% 1,342 31.5% 234 17.5% 3.5x 19.8x Ambulatory Surgery Mean 2,412 4,633 92.0% 1,342 31.5% 234 17.5% 3.5x 19.8x Ambulatory Surgery Median 2,412 4,633 92.0% 1,342 31.5% 234 17.5% 3.5x 19.8x Assisted / Senior Living BKD Brookdale Senior Living Inc. 6,203 12,380 33.82 93.5% 2,931 16.5% 522 17.8% 4.2x 23.7x CSU Capital Senior Living Corp. 685 1,324 23.55 87.6% 367 8.7% 57 15.5% 3.6x 23.3x FVE Five Star Quality Care Inc. 198 233 4.08 67.0% 1,086 0.6% 39 3.5% 0.2x 6.0x Assisted / Senior Living Mean 2,362 4,645 82.7% 1,462 8.6% 206 12.3% 2.7x 17.7x Assisted / Senior Living Median 685 1,324 87.6% 1,086 8.7% 57 15.5% 3.6x 23.3x Behavioral Health ACHC Acadia Healthcare Company, Inc. 3,730 4,717 62.25 93.1% 900 41.1% 180 20.0% 5.2x 26.2x PRSC Providence Service Corp. 543 598 34.24 69.3% 1,304 15.2% 62 4.8% 0.5x 9.6x Behavioral Health Mean 2,136 2,657 81.2% 1,102 28.1% 121 12.4% 2.9x 17.9x Behavioral Health Median 2,136 2,657 81.2% 1,102 28.1% 121 12.4% 2.9x 17.9x Dental Practice Management BDMS Birner Dental Management Services Inc. 28 38 15.65 69.9% 65 1.6% 4 5.6% 0.6x 10.6x Dental Practice Management Mean 28 38 69.9% 65 1.6% 4 5.6% 0.6x 10.6x Dental Practice Management Median 28 38 69.9% 65 1.6% 4 5.6% 0.6x 10.6x Diagnostic Imaging AIQ Alliance Healthcare Services, Inc. 235 701 22.21 62.7% 437-3.4% 113 25.8% 1.6x 6.2x RDNT RadNet, Inc. 358 972 8.38 81.0% 710 3.9% 116 16.3% 1.4x 8.4x Diagnostic Imaging Mean 296 836 71.9% 574 0.2% 114 21.1% 1.5x 7.3x Diagnostic Imaging Median 296 836 71.9% 574 0.2% 114 21.1% 1.5x 7.3x
Selected Public Comparables Selected Public Healthcare Companies (US$ in millions, except per share amounts) Insert Company CIQ Company Name Market Cap Latest Twelve Months (LTM) Value (1) Share Price (2) % of 52- Wk High Revenue 1yr Rev. EBITDA Grow th EBITDA (3) Margin Value LTM LTM Revenue EBITDA Dialysis DVA DaVita HealthCare Partners Inc. 16,227 23,062 75.51 96.2% 12,519 12.0% 2,283 18.2% 1.8x 10.1x DB:FME Fresenius Medical Care AG & Co. KGAA 22,262 30,682 68.81 92.9% 15,666 6.4% 2,712 17.3% 2.0x 11.3x Dialysis Mean 19,244 26,872 94.5% 14,093 9.2% 2,498 17.8% 1.9x 10.7x Dialysis Median 19,244 26,872 94.5% 14,093 9.2% 2,498 17.8% 1.9x 10.7x Distribution ABC AmerisourceBergen Corporation 19,972 20,159 89.01 99.2% 119,569 35.9% 1,371 1.1% nm 14.7x CAH Cardinal Health, Inc. 26,596 28,134 80.36 99.2% 90,631-9.1% 2,390 2.6% 0.3x 11.8x HSIC Henry Schein, Inc. 11,027 11,776 130.94 98.3% 10,196 8.0% 805 7.9% 1.2x 14.6x MCK McKesson Corporation 47,392 54,160 204.38 98.8% 161,201 27.1% 3,546 2.2% 0.3x 15.3x MWIV MWI Veterinary Supply, Inc. 2,026 2,101 157.57 83.6% 2,981 27.0% 133 4.5% 0.7x 15.8x OCR Omnicare Inc. 6,907 8,836 70.56 98.7% 6,326 10.5% 730 11.5% 1.4x 12.1x OMI Owens & Minor Inc. 2,105 2,261 33.37 86.6% 9,267 2.5% 237 2.6% 0.2x 9.5x PDCO Patterson Companies, Inc. 4,696 5,120 46.26 100.7% 4,243 17.0% 400 9.4% 1.2x 12.8x PMC PharMerica Corporation 766 1,120 23.40 76.8% 1,822 4.6% 115 6.3% 0.6x 9.7x Distribution Mean 13,499 14,852 93.5% 45,137 13.7% 1,081 5.4% 0.7x 12.9x Distribution Median 6,907 8,836 98.7% 9,267 10.5% 730 4.5% 0.7x 12.8x Healthcare IT MDRX Allscripts Healthcare Solutions, Inc. 2,217 2,767 12.30 62.5% 1,388 1.1% 46 3.3% 2.0x nm ATHN athenahealth, Inc. 4,708 4,816 123.59 59.8% 711 31.7% 59 8.3% nm nm CERN Cerner Corporation 21,900 20,715 64.14 99.1% 3,181 15.2% 841 26.5% nm 24.6x CPSI Computer Programs & Systems Inc. 685 657 61.14 85.1% 210 6.2% 60 28.5% 3.1x 11.0x HMSY HMS Holdings Corp. 1,834 1,911 20.89 78.5% 453-10.1% 104 22.9% 4.2x 18.4x MDAS MedAssets, Inc. 1,181 2,075 19.61 73.9% 692 2.8% 207 29.9% 3.0x 10.0x QSII Quality Systems Inc. 892 768 14.80 63.1% 462 3.6% 41 9.0% 1.7x 18.5x Healthcare IT Mean 4,774 4,816 74.6% 1,014 7.2% 194 18.3% 2.8x 16.5x Healthcare IT Median 1,834 2,075 73.9% 692 3.6% 60 22.9% 3.0x 18.4x Home Health ADUS Addus HomeCare Corporation 233 223 21.45 72.0% 300 15.5% 20 6.7% 0.7x 11.1x AFAM Almost Family Inc. 250 297 26.35 77.6% 466 34.8% 22 4.7% 0.6x 13.7x AMED Amedisys Inc. 828 937 24.81 92.8% 1,191-6.9% 52 4.4% 0.8x 18.1x GTIV Gentiva Health Services Inc. 709 1,751 19.17 96.3% 1,970 18.3% 154 7.8% 0.9x 11.4x LHCG LHC Group, Inc. 418 478 23.49 90.3% 690 7.5% 49 7.2% 0.7x 9.7x Home Health Mean 488 737 85.8% 923 13.9% 59 6.1% 0.7x 12.8x Home Health Median 418 478 90.3% 690 15.5% 49 6.7% 0.7x 11.4x Hospice CHE Chemed Corp. 1,830 1,985 107.59 96.7% 1,425-0.5% 184 12.9% 1.4x 10.8x Hospice Mean 1,830 1,985 96.7% 1,425-0.5% 184 12.9% 1.4x 10.8x Hospice Median 1,830 1,985 96.7% 1,425-0.5% 184 12.9% 1.4x 10.8x General Acute Care CYH Community Health Systems, Inc. 5,407 22,255 46.50 80.6% 17,129 32.7% 2,142 12.5% 1.3x 10.4x HCA HCA Holdings, Inc. 28,498 56,604 65.73 88.9% 36,118 6.9% 6,662 18.4% 1.6x 8.5x LPNT Lifepoint Hospitals Inc. 3,006 4,965 66.39 86.8% 4,173 15.3% 541 13.0% 1.2x 9.2x THC Tenet Healthcare Corp. 4,664 16,017 47.46 74.6% 16,032 67.9% 1,696 10.6% 1.0x 9.4x UHS Universal Health Services Inc. 9,989 13,415 100.93 87.3% 7,759 7.0% 1,335 17.2% 1.7x 10.0x General Acute Care Mean 10,313 22,651 83.6% 16,242 26.0% 2,475 14.3% 1.4x 9.5x General Acute Care Median 5,407 16,017 86.8% 16,032 15.3% 1,696 13.0% 1.3x 9.4x
Selected Public Comparables Selected Public Healthcare Companies (US$ in millions, except per share amounts) Latest Twelve Months (LTM) Value Insert Company CIQ Company Name Market Cap Value (1) Share Price (2) % of 52- Wk High Revenue 1yr Rev. Grow th EBITDA (3) EBITDA Margin LTM Revenue LTM EBITDA Laboratory BRLI Bio-Reference Laboratories Inc. 782 823 28.21 74.3% 797 16.1% 97 12.2% 1.0x 8.5x LH Laboratory Corp. of America Holdings 8,457 10,896 100.08 91.4% 5,936 2.8% 1,137 19.2% 1.8x 9.6x DGX Quest Diagnostics Inc. 9,111 12,834 63.04 97.5% 7,308 2.0% 1,363 18.7% 1.8x 9.4x Laboratory Mean 6,117 8,184 87.7% 4,680 6.9% 866 16.7% 1.5x 9.2x Laboratory Median 8,457 10,896 91.4% 5,936 2.8% 1,137 18.7% 1.8x 9.4x LTC/SNF DVCR Diversicare Healthcare Services Inc. 66 113 10.75 80.7% 348 40.2% 16 4.6% 0.3x 7.1x ENSG The Ensign Group, Inc. 878 837 39.07 81.8% 988 12.5% 111 11.3% 0.8x 7.5x KND Kindred Healthcare Inc. 1,254 2,573 19.40 72.4% 5,081 5.2% 275 5.4% 0.5x 9.4x NHC National Healthcare Corp. 854 887 60.62 96.4% 855 10.5% 105 12.3% 1.0x 8.5x SKH Skilled Healthcare Group, Inc. 285 682 7.09 89.7% 831-0.9% 67 8.0% 0.8x 10.2x LTC/SNF Mean 667 1,018 84.2% 1,620 13.5% 115 8.3% 0.7x 8.5x LTC/SNF Median 854 837 81.8% 855 10.5% 105 8.0% 0.8x 8.5x Managed Care AET Aetna Inc. 30,324 37,400 86.22 99.9% 56,415 28.1% 4,851 8.6% 0.7x 7.7x CI Cigna Corp. 26,927 30,453 102.94 99.5% 34,098 6.9% 3,057 9.0% 0.9x 10.0x HNT Health Net, Inc. 3,981 3,366 51.09 99.5% 12,993 16.6% 368 2.8% 0.3x 9.2x HUM Humana Inc. 21,079 22,979 137.47 97.7% 46,359 14.0% 2,244 4.8% 0.5x 10.2x MGLN Magellan Health, Inc. 1,674 1,557 61.34 96.1% 3,786 12.4% 199 5.3% 0.4x 7.8x UNH UnitedHealth Group Incorporated 92,591 102,937 96.47 99.7% 128,158 6.7% 10,997 8.6% 0.8x 9.4x WCG WellCare Health Plans, Inc. 3,075 2,424 70.03 89.4% 11,984 32.0% 270 2.3% 0.2x 9.0x WLP WellPoint Inc. 34,355 49,599 127.27 99.3% 72,792 6.4% 5,162 7.1% 0.7x 9.6x Managed Care Mean 26,751 31,339 97.6% 45,823 15.4% 3,394 6.1% 0.6x 9.1x Managed Care Median 24,003 26,716 99.4% 40,229 13.2% 2,651 6.2% 0.6x 9.3x PBM / Specialty Pharmacy BIOS BioScrip Inc. 397 820 5.78 63.9% 1,029 41.9% -3-0.3% 0.8x nm ESRX Express Scripts Holding Company 58,023 71,876 79.06 99.6% 100,356-5.0% 6,472 6.4% 0.7x 11.1x PBM / Specialty Pharmacy Mean 29,210 36,348 81.7% 50,692 18.4% 3,234 3.1% 0.8x 11.1x PBM / Specialty Pharmacy Median 29,210 36,348 81.7% 50,692 18.4% 3,234 3.1% 0.8x 11.1x Physical Rehab HLS HEALTHSOUTH Corp. 3,373 4,844 38.44 90.6% 2,336 5.0% 525 22.5% 2.1x 9.2x SEM Select Medical Holdings Corporation 1,782 3,329 13.61 84.2% 2,997 2.1% 354 11.8% 1.1x 9.4x USPH US Physical Therapy Inc. 465 497 37.93 86.2% 290 14.6% 41 14.3% 1.7x 12.0x Physical Rehab Mean 1,873 2,890 87.0% 1,874 7.2% 307 16.2% 1.6x 10.2x Physical Rehab Median 1,782 3,329 86.2% 2,336 5.0% 354 14.3% 1.7x 9.4x Physician Practice Management MD MEDNAX, Inc. 6,465 6,674 64.38 99.8% 2,356 14.5% 538 22.9% 2.8x 12.4x Phys. Practice Management Mean 6,465 6,674 99.8% 2,356 14.5% 538 22.9% 2.8x 12.4x Phys. Practice Management Median 6,465 6,674 99.8% 2,356 14.5% 538 22.9% 2.8x 12.4x Staffing AHS AMN Healthcare Services Inc. 736 873 15.79 87.8% 1,005-0.6% 84 8.4% 0.9x 10.4x CCRN Cross Country Healthcare, Inc. 297 354 9.49 82.2% 539 22.2% 11 2.1% 0.7x nm ASGN On Assignment Inc. 1,599 1,972 30.54 76.6% 1,809 16.8% 179 9.9% 1.1x 11.0x TMH Team Health Holdings, Inc. 3,899 4,602 54.83 86.9% 2,651 14.9% 282 10.6% 1.7x 16.3x Staffing Mean 1,633 1,950 83.4% 1,501 13.3% 139 7.7% 1.1x 12.6x Staffing Median 1,167 1,423 84.5% 1,407 15.9% 131 9.1% 1.0x 11.0x Source: Company filings. All figures in US$; where applicable, converted at rates as of November 18, 2014. (1) As shown, Value defined as Market Capitalization plus Preferred Stock and Net Debt. (2) Closing share prices as of November 18, 2014. (3) EBITDA reduced to account for minority interest expense.
Selected recent transactions November 2014 A portfolio company of Jemison Investment Co., Inc. and Stonehenge Growth Capital July 2014 has been recapitalized by September 2014 May 2014 Global Coverage. Industry Knowledge. Middle- Market Focus. The Corporate Finance practices of KPMG International s network of independent member firms (KPMG) have been ranked collectively as a leading global mid-market advisor based on total deal volume announced in 2013, according to Thomson Reuters SDC. KPMG firms operate in 156 countries with over 2,600 professionals who are able to meet the needs of clients across the globe. KPMG Corporate FinanceLLC KPMG Corporate Finance LLC (KPMG CF) provides a broad range of investment banking and advisory services to its domestic and international clients. Our professionals have the experience and depth of knowledge in global M&A and project finance to advise clients on mergers and acquisitions, sales and divestitures, buyouts, financings, debt restructurings, equity recapitalizations, infrastructure projectfinance,capital advisory, real estate, portfolio solutions, and other advisory initiatives. Formore information onkpmg CF, please visit www.kpmgcorporatefinance.com. A portfolio company of March 2014 December 2013 Healthcare Investment Banking Contacts Christopher Mercier Managing Director Chicago T: +1-312-665-8091 E: cmercier@kpmg.com Maureen Spivack Managing Director NewYork T: +1-212-954-4248 E: mspivack@kpmg.com Adam Heller Vice President Chicago T: +1 312 665 1353 E: aheller@kpmg.com kpmgcorporatefinance.com