Healthcare Investors Expect Industry-Specific Deal Drivers to Facilitate a Significant Uptick in M&A Activity This Year


NEW YORK, July 15, 2010 - The healthcare sector is positioned for a significant increase in M&A activity this year; however, deal drivers will vary considerably across individual industry subsectors, according to a survey published by mergermarket in association with Epstein Becker & Green, P.C., a national law firm focused on serving the needs of the healthcare industry, and Rodman & Renshaw, LLC.

Based on a series of interviews with more than 75 healthcare investors in the U.S., the report provides insight into emerging trends in M&A activity in specific segments of the healthcare sector, including biotechnology and pharmaceuticals, medical devices, healthcare providers and payors, and healthcare services.

For healthcare payors and providers, as well as for healthcare services companies, government reform initiatives will be the most significant driver of M&A activity, according to 65 percent and 59 percent of respondents, respectively. Meanwhile, a desire for new products and technologies will outweigh healthcare reform as the primary driver of M&A activity among biotechnology and pharmaceuticals companies and among medical device manufacturers and suppliers, according to 46 percent and 33 percent of respondents, respectively.

Financial buyers are expected to be the most active acquirers in the healthcare services industry, which covers healthcare IT and data management, while strategic buyers will be more prominent in the biotechnology and pharmaceutical market following on major large-cap consolidation over the past year. Additionally, 61 percent of respondents predict an increase in the volume of PIPE transactions in the biotechnology and pharmaceuticals subsector, where 51 percent of respondents say investors will focus on companies with strong product pipelines.

When investing abroad, 41 percent of respondents say healthcare investors in the U.S. will focus their attention on China this year, due largely to its expanding middle class and its attractive pharmaceuticals market. An additional 30 percent of respondents expect Western Europe to see the most interest from U.S.-based healthcare investors.

Additional findings include:

  • 56 percent of respondents expect bridging the gap between buyer and seller expectations to be the most challenging part of the M&A process this year
  • 40 percent of respondents believe healthcare companies' inability to access capital in the current market will drive PIPE deal volume
  • 43 percent of respondents expect equity to be the most prominent financing source for healthcare M&A transactions over the next 12 months

To view the report in its entirety, click here.