Life Sciences & Healthcare (LS&HC): A Q2 M&A Outlook

It’s safe to say that the LS&HC sector has been through a lot. From inflationary and pricing pressures throughout 2022, the sector’s not been immune from macro pressures affecting the M&A market. Here’s our M&A outlook for LS&HC in Q2.

Private capital interest remains high in the sector. However, the buyer-seller-bid-ask spread needs to be rebalanced so that M&A volumes can fully return to pre-2022 levels and increased debt capital costs can be accounted for.

As we look ahead to this year, we see four key M&A-led drivers within Life Sciences. The first is an ongoing focus from corporate on portfolio optimisation and rationalisation. Secondly, we expect to see drug pipelines improve. The third driver is access to technology that will streamline the efficiency of clinical trials and offer personalised medicine and/or innovative therapies and will also combat labour shortage issues. Finally, geographic footprints will be developed and refined.

We anticipate dramatic changes in healthcare systems worldwide as many countries face societal challenges. We believe there will be three main vital drivers for M&A in this sector. They are:

1. An ageing population. This is driving demand for new models of high-quality healthcare services that are professionally delivered. The current provider landscape outside the National Health Service (NHS) must be more cohesive. A significant proportion of UK healthcare property estate is either dated or unfit for purpose. As a result, we expect to see continued private capital investors such as private equity, family office, real estate funds and Real Estate Investment Trusts (REITs), consolidate providers and help them meet this challenge.
2. Increasing consumerisation. As more and more people actively manage their healthcare, the demand for greater access to information and services, such as telemedicine and online consultations, will grow. To stay competitive, providers are looking to offer a broader range of services, such as preventative healthcare (including diagnostics) and wellness services. We expect existing providers to use M&A to expand their service offerings, so they provide a more comprehensive range of services to patients.
3. Growing political will in the UK to improve the delivery of healthcare services. The government has committed to increase funding for the NHS. There’s a growing realisation that investment in new services and technologies will improve the quality of care while ironing out inefficiencies.
   
   

It is also worth noting that considerable investment is being made in HealthTech services and software to improve quality of care.

The number of businesses preparing for sale processes, significant cash reserves, and dry powder for corporate and PE investors tells us one thing. There’s available capital flowing into the traditionally resilient and higher-growth sectors. We expect to see M&A activity grow throughout 2023.

Please contact a member of our team and find out how we can help you discuss your organisation's 2023 M&A agenda.