CDI Global

The State of the Healthcare Sector M&A Market

After peaking in 2019, healthcare corporate M&A disclosed deal value dropped 37% to $338.6 billion. Deal volume also declined, albeit by a more modest 9%, to 2,845 deals (see figure below). While deals greater than $5 billion accounted for 42% of the total value, the drop in the number of megamergers (over $20 billion) meant that value was less concentrated than in prior years.

Healthcare private equity deal volume increased by 21% to a total of 380 deals in 2020, compared with 313 the year earlier, despite a 14% decline in total global PE activity. Total disclosed deal value fell 17% to $66 billion, which is robust considering the effects of Covid-19. The average size of deals with disclosed values dropped 57%, due in part to a lack of very large deals. The average declines were most pronounced in North America and Europe. 

Across economies, the entities that pay for healthcare—namely governments, insurers, employers, and consumers—are pressuring providers, drugmakers, and medtech companies to stem the endless rise in costs. At the same time, investors accustomed to robust returns from healthcare companies are pushing for continued top and bottom-line growth.

Source: Global Healthcare Corporate M&A 2021, Bain Capital

Contract development and manufacturing organizations (CDMOs) that focus on innovative drug development and technologies, including the messenger RNA (mRNA) technology now successfully used in COVID-19 vaccines, will be attractive to large pharma companies looking to add to their pipeline and development capabilities (across all therapeutic areas) via mergers and acquisitions.

Valuations for Medtech, healthcare IT, and pharma services have both risen, likely the result of COVID-19-related demand. Medtech includes companies producing diagnostic testing supplies, personal protective equipment, and acute care devices such as ventilators. The pharma services subsector includes companies that are working to develop vaccines and treatments for COVID-19. ( source PWC https://www.pwc.com/gx/en/services/deals/trends/health-industries.html )

Marc De Clerck

Managing Partner, CDI Global

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