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Healthcare M&A Activitiy: Three Healthcare Small Caps Primed For Takeovers
By: Investment U   Thursday, October 22, 2009 12:27 PM

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by Louis Basenese, Small Cap & Special Situations Expert

Thursday, October 22, 2009: Issue #1121

With the healthcare debate still raging in Washington, this should shock you…

Healthcare mergers and acquisition (M&A) activity is at an all-time high.

You'd think with so much uncertainty surrounding the future of the industry, the dealmakers would be as lonely as a geek on prom night.

But that's just not so.

  • Based on the dollar value of transactions, roughly one-third of all deals in the United States this year involved healthcare companies – considerably higher than the historical average of 10%, according to Dealogic.
  • And based on the number of transactions, about 13% of all deals in 2009 have involved healthcare companies. Again, that's notably up from the historical average of 9%.

Let me share why we can expect the record-setting activity to continue – and, of course, three ways to capitalize on it.

What's Greasing the Skids for Healthcare M&A Activity?

At first glance, you might question the savvy of healthcare executives to make acquisitions in such an uncertain climate. After all, healthcare stocks have significantly lagged behind in the S&P 500 rebound, rising only 9.6% compared to a 20.8% increase for the Index, year-to-date.

But rest assured, they're not buying blindly. In fact, the companies at greatest risk of cost cuts (and, in turn, less profits) – insurers, hospitals and nursing homes – remain on the sidelines.

Instead, it's companies in other categories – like drug makers, research labs, equipment manufacturers and healthcare technology companies – that are so acquisitive. Here's why…

Regardless of the end result of the legislation in Washington, one thing is glaringly obvious: millions more Americans will get healthcare coverage. And that represents millions more potential customers.

Companies are simply jockeying for position, so they can capture a larger share of the new demand.


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The above story is the opinion of the author only and it does not reflect iStockAnalyst opinion. Further, the author is not personally advising you regarding the suitability of the story for your investment needs. In no event iStockAnalyst will be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever arising from or arising out of, or in connection with the use of this information. Please consult your investment advisor before making any investment decision.
  
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