Value of health sector M&As reach record levels in early 2014

Out-Law News | 29 Apr 2014 | 12:28 pm | 1 min. read

The total value of merger or acquisition deals in the global healthcare market so far this year exceeds €163 billion, representing the highest levels for year-to-date figures since records were first compiled in 2007, according to market analysts Dealogic.

There have been 667 M&A deals in the global healthcare market so far this year, Dealogic said, down from the 825 deals completed in the sector by this point last year. However, the value of the deals so far this year outstrips the comparative figure from 2013 of just below $110bn, it added. There were 2,544 healthcare sector M&A deals completed in 2013, with the total value reaching just short of $300bn.

Health and infrastructure law expert Barry Francis of Pinsent Masons, the law firm behind Out-Law.com, said that a number of factors have contributed to the rationalisation of the market and businesses looking to extend their capabilities.

Francis pointed to "the growing internationalisation of healthcare provision" as one of the drivers behind growth in healthcare M&A deals, and also said that businesses are also entering into such deals because of the growing importance of technology in assisting with, and altering the nature of, care.

In addition, Francis said that businesses operating in the healthcare sector are becoming increasingly focused on service provision rather than the mere supply of products to healthcare providers and also highlighted "the growth in demand for private healthcare" as another contributing factor.

Industry is also being increasingly relied on to plug gaps in healthcare provision offered by governments in some advanced economies through where services have been traditionally paid for by taxes or social insurance.

"The UK is a classic example with public healthcare expenditure capped but where demand is rising," Francis said.

Corporate law expert Andrew Kerr of Pinsent Masons also said that large businesses operating in the sector may have turned to strategic mergers or acquisitions to achieve innovation and make use of their strong, cash-rich balance sheets. 

Competition law specialist Jenny Block of Pinsent Masons said that the challenges facing some of the biggest pharmaceutical companies with revenues threatened by expired or expiring patent protection, coupled with the need to refresh the research and development pipeline may have prompted "a desire to acquire selectively in centres of excellence" so those businesses can diversify.

"Many of these acquisitions give rise to competitive overlaps both in terms of products already on the market, but also in poles of research, which may lead to divestments being required," Block said. "However the sector is adept at managing such issues and may well have anticipated possible requirements or sacrifices already with a view to seeking early resolution of merger control procedures."