2021 China LSHC M&A Market Whitepaper

Published: 27 September 2021

Viewpoints and key findings

2021 China LSHC M&A Market Whitepaper looks at M&A activity in China's LSHC industry in 2020 by sub-sectors and the 10 largest deals to understand the underlying drivers. It also evaluates PE/VC activity and the IPO financing landscape in China's LSHC market. In the end, it identifies five trends that driving growth in China LSHC M&A market in the years ahead.

2020 was an active year for M&A transactions in China's LSHC industry. Although affected by the COVID-19 pandemic, cross-border transactions remained quite active, with foreign investors, most often from the US, becoming more proactive in China's capital market. By subsector, 2020 M&A transactions in LSHC were dominated by drugs and biotechnology.


PE/VC and IPO financings in China's LSHC market

Despite the COVID-19 outbreak, PE/VC investments in 2020 reached more than USD13.8 billion, exceeding 2019's level. Drugs/biotech has been the frontrunner in attracting PE/VC financings, and medical device companies are receiving more attention and interest from capital markets. There are two major investment traits in China's LSHC market:

  • Domestic investors driving activity
  • LSHC companies raised larger funds pre-IPO on SSE or SZSE boards from 2016 to 2020


China LSHC M&A trends in H1 2021 and forecast

In the near term, we expect overall growth of M&A in the China LSHC market, especially in innovation development that aligns with the requirements of the 14th Five-year Plan and the digitalization of healthcare services and distribution channels.

  • Business opportunities driven by COVID-19 in the post-pandemic era
    There are still unmet needs in disease prevention and iHealth services. However, Chinese citizens will place increasing emphasis on preventive healthcare measures and medicines.
  • Digitalization and innovation driving growth in life sciences fundraising 
    Life sciences should continue to be highly popular, driven by two main factors: digitalization penetrating the entire biomedical industry chain, from R&D and production to marketing; innovation development buoying the pharmaceutical industry on the wave of VBP.
  • Localizing every aspect of medical devices 
    Import substitution of medical devices is now in full swing, and China has the infrastructure and resources to encourage innovation in the medical device sector and develop mid-to-high-end medical devices manufacturing.
  • The growth of CXO services
    CXO companies in China have a large room for development. They will also benefit from strong demand from domestic firms as Chinese pharmaceutical companies increasingly look away from generics towards innovation.
  • Hospital integration to create brand effect
    There is a trend of hospitals integrating and operating as a group to create a brand effect in offering medical services in China. We expect to see more large public hospitals will consolidate the hospitals within the region via partnership or acquisition instead of going private.
  • Changing population structure set to usher in new senior care needs
    With the in-depth development of "Internet+" and mobile healthcare, telemedicine will be widely used in senior care in the post-pandemic era and innovations in chronic disease management will increase. This could herald a new wave of capital investment in smart senior care.


We expect that the LSHC capital market in China will be driven by two main factors: industry upgrading driven by innovation breakthroughs, and online-offline integration. When making investment and merger decisions, market players need to fully understand and grasp the national goals and aspirations, which requires more attention than ever before.

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