{{item.videoDuration}}
{{item.title}}
{{item.text}}
{{item.videoDuration}}
{{item.title}}
{{item.text}}
Pharmaceuticals and life sciences (PLS) and healthcare services (HCS) continue to attract high levels of investor interest, and we expect this trend to continue during the second half of 2022. As we anticipated in our 2022 Outlook, capability-driven deals that provide access to new technologies, such as mRNA, gene therapy and telehealth capabilities, are proving attractive for large corporations and private equity (PE) alike.
Volatility in the public markets may restrict some corporates’ deal-making capacity for larger deals. However, lower public-company valuations are creating an opportunity for public-to-private transactions. We expect that PEs, which are flush with abundant capital, will be actively pursuing M&A in health industries over the next six to 12 months.
Companies in health industries will continue to look to acquisitions to achieve their growth plans. However, antitrust scrutiny from regulators, particularly in the US, UK, Europe and Canada, has made transformative megadeals more difficult to complete. Most companies will find they need to undertake a higher number of smaller transactions to achieve the same outcomes, such as pharma companies acquiring multiple medium-sized biotechs or PE funds creating specialist care platforms through a series of roll-up acquisitions.
‘M&A is holding up remarkably well in 2022 as health industries investors seem largely undeterred by the economic uncertainty and other headwinds, remaining focused on acquiring innovative companies that can fuel growth via new technologies and digital capabilities.’
Global M&A trends in health industries
Pharmaceuticals and life sciences
- Although the Russia–Ukraine conflict hasn’t had a significant direct impact on pharmaceutical companies’ operations, it has led to many business leaders reassessing risks and dependencies in their global supply chains and turning to M&A to regain more control. We expect to see deals being made up and down value chains, from raw components to product distribution. On-shoring, near-shoring or “friend-shoring” (trading with countries that have similar values and strategic interests) of supply chains through M&A may reduce lead times and provide much-needed certainty to customers.
- Companies with capabilities in innovative technologies, such as mRNA vaccine production or new medical device innovation, are among the fastest-growing and are attracting significant investor attention. Large pharmaceutical conglomerates are continuing to optimise their portfolios and divest non-core assets. They are also competing with PE funds for innovative biotech companies, contract development and manufacturing organisations, and contract research organisations. Rising interest rates and declining stock prices will put additional pressure on corporate divestiture plans and the ability of corporations to free up capital for M&A.
Healthcare services
- The trend towards the consumerisation of healthcare continues. Vitamins, minerals and supplements (VMS) and nutraceuticals companies command high multiples, and we expect these to remain attractive assets. Meanwhile, traditional consumer and retail companies are exploring entry into pharmaceuticals; for example, we have seen retail companies investing in online pharmacies this year.
- We expect to see continued consolidation of private clinics, specialist care providers and services groups—such as ophthalmology, in vitro fertilisation and nursing homes/elderly care—which remain fragmented across different markets.
- Veterinarian and other pet care companies continue to attract interest across all territories. We expect this deal activity to continue, along with high valuations.
- An increase in distressed deals may arise in some sectors that received significant government backing during the pandemic, but in which support is being reduced. Many hospitals, for example, are facing significant operational challenges due to persistent labour shortages. For those hospitals operating in countries where government funding is being phased out, the combination of factors may result in liquidity challenges that could lead to an increase in restructuring or distressed M&A.
- To unlock value, operators need to embrace digitisation and accelerate the adoption of digitalised practice management and digital solutions that put patients at the centre of the care journey. Staffing challenges, exacerbated by the pandemic, have put further pressure on healthcare providers to find digital efficiencies to help bridge the gap left by a shortage of skilled employees. Telehealth, health tech and analytics companies will continue to be attractive assets to help fill these value gaps.
Mid-year M&A outlook for health industries
M&A activity in health industries will remain high despite an unpredictable macroeconomic and sociopolitical climate. PE funds have significant dry powder to deploy, and large corporates remain committed to growth through M&A and appear undeterred by recent declines in stock prices, rising interest rates or inflation. This capital will compete to buy small and midsize innovative companies that unlock access to new technologies and digital capabilities. All this suggests a busy time ahead for dealmakers in the remainder of 2022.
Explore our local M&A trends in Health Industries from the following countries:
Want to know the M&A trends we expected in Health Industries at the beginning of 2022?
{{filterContent.facetedTitle}}
{{contentList.loadingText}}
{{contentList.loadingText}}
Contact us
