Bain & Company’s seventh Global Healthcare Private Equity and Corporate M&A Report shows how investors are competing against new entries of big tech firms and retailers
NEW YORK, April 18, 2018 (GLOBE NEWSWIRE) -- Healthcare M&A and private equity saw a banner year in 2017, amid a rapidly morphing industry and against a backdrop of political and economic uncertainty. Investors entered the year contending with the possibility of US legislative roll backs and the uncertainty that major economies might slip back into recession due to the unusual longevity of the global recovery.
Smart investors looked for innovative ways to expand along the value chain this year, blurring the lines between payers and providers and navigating the entry of new non-healthcare players, including technology giants such as Apple, Amazon, Samsung and Tencent.
However, investors continued to latch onto the fundamental forces that have long made healthcare such a compelling investment: an aging population, the rising prevalence of chronic disease, the continuous development of innovative drugs and devices, and a still fragmented and largely inefficient delivery system that is ripe for innovation, disruption and consolidation.
These are the findings from Bain & Company’s seventh Global Healthcare Private Equity and Corporate M&A Report, released today.
Healthcare M&A deal value surged in 2017, rising 27 percent to $332 billion, while deal count increased 16 percent. Three megamergers, with a collective value of $126 billion, accounted for more than one-third of that total. This activity is a result of pressure from governments, insurers, employers and consumers to cut costs, while investors pushed for continued top- and bottom-line growth.
“The industry is at a major inflection point, and as a result, we’re seeing category leaders consolidate and the silos between sectors starting to blur,” said Dale Stafford, partner and leader of Bain’s Americas M&A practice. “While total corporate deal value in healthcare hasn’t quite equaled its 2015 peak, average annual activity over the past four years has been strong, nearly twice the level of the previous four years. This activity is profoundly reshaping the industry.”
The global healthcare private equity market soared in 2017, with the total disclosed deal value reaching $42.6 billion, the highest level since 2007. The top 10 deals, with values ranging from $1.3 billion to $5.0 billion, accounted for more than half of that, though deal count increased dramatically, rising to 265 from 206 the year before.
“Healthcare PE investors drove stellar growth this year, despite intense competition from generalist funds, tech-focused funds, institutional investors and corporate acquirers,” said Kara Murphy, partner and co-leader of the firm’s Healthcare Private Equity team. “To keep pace with rising valuations, funds had to get creative with their deal making, taking public companies private and buying businesses from companies ready to divest units that no longer fit with their strategies.”
The four largest deals of 2017, collectively valued at more than $15 billion, involved public-to-private transactions, and PE funds were buyers in two corporate carve-outs in the $500 million to $5 billion sweet spot for large PE funds.
“Firms across the sector are feeling the effects of several major disruptive forces, many of which have already transformed other industries,” said Nirad Jain, partner and co-leader of Bain’s Healthcare Private Equity team. “We’re just starting to see the ramifications of these trends, which will have a long tail across the industry for years to come. Forward-looking companies are reviewing their investment strategies now to capitalize on the opportunities and mitigate the risks of disruption.”
Five Key Disruptions in Healthcare
A look ahead for 2018
Despite valuations at or near record highs, we expect a continued high level of M&A activity in 2018 as healthcare companies continue to look to M&A as a vital component of their growth strategy. Already, we’ve seen aggressive moves by corporates across healthcare, retail and technology this year, fusing sectors and leading others to make offensive and defensive moves. We expect this and the other trends that drove deal activity in 2017 to continue, and we expect three additional forces to impact the deal landscape in 2018.
To receive a copy of report or arrange an interview with its authors, contact: Katie Ware at katie.ware@bain.com or +1 646 562 8107.
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Media Contact:
Katie Ware
Bain & Company
Tel: +1 646 562 8107
katie.ware@bain.com