2010 l 3rd Qtr l Trends Report l Healthcare

Wednesday, October 20, 2010

Third Quarter Key Highlights

• The most active acquirer through Q3 2010 was Ingenix, Inc., a subsidiary of UnitedHealth Group, with 5 purchases: A-Life Medical, Inc., Axolotl Corporation, Executive Health Resources, Inc., Picis, Inc. and QualityMetric, Inc.
• The largest reported transaction in Q3 2010 was Vestar Capital Partners’ acquisiton of Health Grades, Inc. for $250 million.
• Strategic buyers have been the dominant acquirers in Q3 2010, representing 52 of the total 69 transactions.

Third Quarter Key Trends

• Total transaction volume in Q3 2010 increased by 43 percent over Q2 2010, from 48 to 69 transactions.
• Total transaction value in Q3 2010 decreased by 17 percent from Q2 2010, from $4.5 billion to $3.7 billion. This decline is exaggerated a number of large transaction occurring within Q2, as shown in Fig. 3.

Multiples & Value Trends

• Median multiples have shown marked growth from 2009 to the first nine months of 2010. Median EBITDA multiples rose from 8.1 to 11.5, a 41 percent increase, while median revenue multiples rose from 1.2 to 1.9, a 58 percent increase.
• Ebix, Inc.’s purchase of A.D.A.M., Inc. for $60 million represents a 2.3 revenue multiple, while Vestar Capital Partners’ acquisition of Health Grades, Inc. for $250 million represents a 4.4 revenue multiple.

Top Ten Deals Through Q3 2010

• The top ten deals by value have shifted since our last report, with four acquisitions entering the list in Q3 2010: Vestar Capital Partners acquisition of Health Grades, Inc. and Emdeon, Inc.’s acquisition of Chamberlin Edmonds & Associates, Inc., and Ingenix’s acquisiton of Picis, Inc. and Executive Health Resources, Inc.
• No financial terms have been released by Ingenix on their purchase of Picis, Inc. and Executive Health Resources, Inc., but the transaction value that has been reported merits these deals’ inclusion within the Top 10.