Top Trends Driving The Healthcare M&A Boom

In 2021, there were over 4000 deals done in the healthcare sector globally (up 23% from 2020), making it one of the most active industries in terms of M&A. There’s no doubt the sector is booming, fuelled, in part, by Covid-19 and significant global megatrends. Here, Rebecca Zhu, Managing Director at Translink Corporate Finance China, and Jens Borelli-Kjær, Partner at Translink Corporate Finance Denmark, unpack trends, growth drivers, and the implications for M&A.

Top Trends Impacting the Healthcare Sector

1. The rapid growth of biopharmaceuticals: Over the last five years, growth in biopharmaceuticals has been quick compared with traditional chemical medicines, catalysing myriad transactions across the USA and Europe. This pace of growth shows no sign of abating. In the pharma side of healthcare, there’s also going to be increased emphasis on individual immune therapies.
2. Accelerated digital adoption: As in almost every industry, Covid-19 caused fast adoption of virtual technology across most healthcare divisions.
3. Increase in CRO industries: There’s likely to be an increase in CROs (contract research organisations), CMOs (contract manufacturing organisations) and CDMOs (contract development and manufacturing organisations) as more large pharmaceuticals outsource preclinical research to these specialist companies.
4. Growing global population with large regional variations: The current world population of 7.7 billion will increase by another 2 billion or 25% by 2050. However, there are large regional differences. China’s population will be shrinking already from 2030, at the same time it’s being surpassed by India’s. In Africa, the population south of Sahara will nearly double from 1.1 to 2.1 billion by 2050. This, combined with other factors, will lead to major geographical shifts in “consumption of health” over the coming decades.
5. But we’re living for longer: State pension ages are rising around the world. Longevity has increased. Many factors lie behind: Increased wealth, lower child mortality, better nutrition, better work conditions etc. Couple more money with a longer life expectancy, and people will be demanding – and affording – more healthcare. Again, this is a megatrend with massive implications for the industry.
6. Increasing regulation: More regulation means it will be increasingly tricky for start-ups to bring fresh offerings to the market unaided. It’s likely that it will be larger and larger companies that have the muscle to take products to the market and comply with the requisite regulation, supported by an under-forest of innovators with new ideas.
7. The impact of Covid-19: The pandemic’s legacy for healthcare will hopefully be innovative use of RNA technology for more efficient vaccines for other regimes, like malaria. On a historical scale, the impact of Covid-19 is likely to all but disappear.
8. China’s experiment: China’s unique centralised procurement policy is having a massive impact, given that all companies now need to participate in government-organised bids for business to public hospitals. A coronary stent now costs a tenth of what it once did. Small- to medium-sized players with no competitiveness in innovation are being all but eliminated from the market. Even large traditional players have seen their market share drop due to decreased profit from failed bidding attempts. This is causing significant stock market fluctuations for healthcare companies.
9. Serious about supplements: Around the world, non-traditional medicines and supplements are having a moment in the sun, with a pandemic-prompted sales spike.

In a nutshell, the main growth drivers for the industry are likely to be the combination of increased wealth (more buying power), ageing – and shrinking – populations, and innovation – new treatment technologies and opportunities. These factors will drive returns for the industry.

Forecast for M&A activity

In 2018, there were 3514 transactions in the sector. That grew to 4082 in 2021, an increase of 28%. Transactions will continue to grow – for example, we’re expecting lots of activity in the biopharmaceutical industries. We’ll also possibly see small-scale transactions in tech-related healthcare firms, which both private equity and giant healthcare players may be interested in acquiring to accrue complementary capabilities. Another trend is that big companies – like Johnson and Johnson for example – are divesting some of their non-core businesses. There’s been a wave of this kind of activity over the last 18 months.

Why Translink is the perfect partner to navigate the next 50 years

Translink considers the human healthcare industry to consist of the following 7 segments: Pharma, medical device equipment, medical device consumables, biotech, distribution of drugs and devices, in-patient treatment facilities and out-patient treatment clinics.

This year, Translink celebrates 50 years of M&A excellence. The group comprises more than 300 experts across six continents, with deep sector-specific expertise. In the healthcare sector, Translink has an industry expert group of 21 individuals across the world. Many have CXO, business and management experience. The fact that most people have worked in the industry truly sets the team apart, enabling them to offer first-hand experience. It also means the team has an extensive global network, with excellent relationships with players around the world. When it comes to getting the deal done, this makes all the difference.