The global healthcare industry is huge and growing larger every year.
Healthcare encompasses specialist sectors such as BioMed and MedTech as well as more established industries such as traditional healthcare and pharmaceuticals. These newer life science tech sectors are growing in strength as advances in medicine and human health continue unabated, while the traditional sectors profit from growing populations.
While Europe and the US remain leading centres for the healthcare industry, the emerging powerhouses of India and China are becoming hotspots for innovation, investment and acquisition.
As the industry expands, emerging technology startups are rapidly becoming targets for larger acquisitive competitors that have strategic portfolio gaps to fill. Opportunities for consolidation are also being created for established businesses looking to strengthen their grip on a sector. Additionally, PE activity is creating alternative exit paths for mature middle-market companies in MedTech and BioMed.
Figures from international consultancy Bain reveal that healthcare M&A reached USD546 billion in announced deal value in 2015, which was an increase of 2.5 times on the average annual deal value of the previous decade.
More figures from Bain back up this trend, showing that growth in healthcare M&A deals significantly outpacing growth in overall deals over the past few years. From 2012 to 2015, overall M&A grew at a compound annual growth rate (CAGR) of 24 per cent while healthcare M&A grew more than twice as fast, at a 50 per cent CAGR.
Healthcare M&A made up 6 per cent of European mid-market M&A in 2016, a market worth USD256 billion in total, according to Thomson Reuters. Healthcare M&A was particularly strong in Germany during 2016, with the share of total M&A activity at 7.3 per cent from a market worth USD34 billion. The picture was even more healthy in India, with 13.6 per cent of deals taking place in the healthcare sector, from a total market worth USD24 billion.
Finance for these M&A transactions often comes from the US which has a long track record of private equity investment in healthcare and related industries.
Figures from Silicon Valley Bank (SVB) for mid-year 2017 describe a real seller’s market in the US, revealing that US healthcare venture fundraising for the full-year 2017 is certain to surpass USD6 billion, and could set a full-year record.
Biopharma seems to be driving this enthusiasm, set to closely match investment levels for 2016 at around USD8 billion, according to SVB. The bank predicts that the US biopharma sector should see between 28 and 32 IPOs in 2017 and 15 acquisitions, driven by a strong private company backlog.
One emerging trend SVB highlight is the tendency for tech-focused investment firms to aggressively invest in healthcare companies that are developing artificial intelligence and machine learning (AI/ML) technologies designed for biopharma.
With these trends in mind, IR Global brought together three senior members of healthcare M&A consultancy MedWorld Advisors, along with four members of their senior advisory network, to discuss the opportunities in global healthcare M&A in more detail.
The following discussion addressed the current landscape for healthcare M&A, analyses how businesses can boost their value prior to sale and highlights the expertise the MedWorld Advisors network can bring to bear preparing healthcare businesses for value maximising acquisition.