Analysis

M&A trends in life sciences and health care

Growth at the global intersection of change

Pharmaceutical firms, health care companies and other life science enterprises are increasingly expanding into new markets in their search for growth, driven by a combination of shrinking pipelines, more rigorous regulatory scrutiny, patent expirations, and competition from generic manufacturers. While high-profile M&A deals have grabbed headlines, some of the more subtle aspects of this expansion are less well understood.

Executive summary

Anyone witnessing the feverish deal-making that has swept through the global life sciences and health care industry recently might well conclude that mergers-and-acquisitions (M&A) activity has become the dominant force shaping the industry. M&A is just one way forward as companies respond to changes in this dynamic and innovative space.

This report, based on a March 2014 survey, reveals that partnerships and informal collaborations also form an important part of the picture as companies continue to grapple with a rapidly shifting landscape. A number of factors are driving changes in the life sciences sector—from financial pressures such as decreased reimbursement and consolidation to the expiration of patents, from the development of new drugs and treatments to health care reforms of various types. Demographic trends, such as aging global populations, are also driving change. 

In addition to M&A activity, companies are coping by encouraging organic growth, seeking collaborations within the industry and developing new business models. While M&A activity is on the rise, companies are being more deliberate, even cautious, when considering potential deals; they want to ensure that they’re the right deals to increase capabilities and expand their footprint. This appears to be especially the case for small and mid-sized firms across regions.

Key findings

Our survey results and executive interviews support the following conclusions:

  • Economic factors and the regulatory environment are the most important considerations when companies evaluate new markets.
  • Competitive pressures, as well as a desire to diversify their portfolios, are the strongest motivators for companies embarking on mergers or acquisitions.
  • For almost half of pharmaceutical companies, patent expirations are a motivation behind M&A activity.
  • The most experienced acquirers identified tax considerations as a driver of M&A activity.
  • The North American life sciences and health care market remains the primary investment destination for the industry, followed by the Asia-Pacific region.
  • For most respondents, acquisitions account for nearly 25% of the investments in their target investment country.
  • Most companies prefer the familiar, targeting their home markets for M&A deals despite pressure to expand into faster-growing territories.
  • Industry executives anticipate an increase in various forms of collaboration, particularly in the pharma sector, to help spread risk.
  • Among large companies, 70% anticipate M&A activity in the next three years.
2014 DTTL LSHC M&A trends survey
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