As healthcare faces digital disruption from new R&D and technology entrants, the big leaders are reconsidering the sector boundaries they previously took for granted and are reaching across sectors to access new markets and new revenue sources. In 2017, we saw a significant surge in healthcare M&A activity, with a 13% increment in mergers and acquisitions when compared to the previous year. This amounts to the highest number of recorded healthcare merger and acquisition deals in the past decade.
Whether it is a provider announcing a new deal or the sale of its facilities, hospitals and health systems significantly contributed to the spike in healthcare merger and acquisition activity in 2018.
HERE’S WHAT THE EXPERTS & LEADERS SAY
According to a recent survey of experts, leaders, and forecasters in healthcare 42% of them think that the M&A activity will see a substantial upsurge in the next 5 years.
A deep dive into how this activity will play out in specific sectors within healthcare is worthwhile. Here’s the market activity of 2017-2018 in biomedical,pharmaceutical and biotechnology.
The medical device sector outperformed the broader markets over the twelve months of 2017. Furthermore, experts anticipate an
increased presence from private equities and a greater number of new entrants, while product based companies keenly look forward to capitalize on the wider healthcare tailwinds and leverage their manufacturing expertise. According to GE and Siemens, divestitures will likely continue to be a central piece of M&A activity within the sub-sector.
Some major game-changing acquisitions that took place:
ANALYSIS AND DEALS STATISTICS
Pharma maintained its leading position with the highest deal volume of any sub-sector for the third time in the last four quarters. Disinvestments continue to be a focus for Pharma as it is the on quest to strike a rebalance by monetizing certain assets to further invest in their long-term pipeline, either internally or through acquisition. Strategists face conflicts from Private Equity firms that are taking a more active role in bidding for the similar targets.
Here are some major acquisitions in Pharma last year:
Biotech had the highest deal value of any sub-sector and represented four of the ten largest deals in the quarter. The largest transaction of the period was the acquisition of China Biologic Products Holdings, Inc. by a Chinese investment group for $3.9B. Biotechs continue to evaluate the impact of a changing regulatory environment which may provide longer protection of exclusivity for certain biosimilars within the American market. The impact on digital technologies may propel M&A activity while companies strive to ensure they possess the right competencies to attain profits in an evolving sub-sector.
Other game-changing major acquisitions:
ImageSource: S&P capital IQ
However, what truly contributes to a customer-centric and prolific business is not only an exemplary domain expertise but also the digital disruption blended with your fundamental business functions.According to a latest EY’s Digital Deal Economy Survey , healthcare and lifesciences are allocating significant funds to digital. Click To Tweet
As we’ve suggested, while there are many factors driving this M&A activity across the industry, digital technologies are becoming an increasingly important factor, as organizations struggle to acquire expertise in digital technologies and prioritize the need to understand and them effectively.
It is important to overhaul the asset from every angle, and bid a goodbye to those conventional M&A due diligence and evaluation models. While evaluating a new acquisition, alliance or joint venture, companies should assess the digital outlook for both the business and the markets in which it operates.
Some key areas of interest for healthcare enterprises in the domain of digital technologies include:
Stay ahead of the game
Technology innovation will enable you to step-up your digital journey and gain competitive edge over other global healthcare players and leaders. Actionable insights and cost optimization are the major pros, as the combined effect of digital innovation and core-domain expertise will facilitate accurate decision-making.