Pharmaceuticals and life sciences (PLS) and healthcare services (HCS) continue to attract high levels of investor interest, and we expect this trend to continue during the second half of 2022. As we anticipated in our 2022 Outlook, capability-driven deals that provide access to new technologies, such as mRNA, gene therapy and telehealth capabilities, are proving attractive for large corporations and private equity (PE) alike.
Volatility in the public markets may restrict some corporates’ deal-making capacity for larger deals. However, lower public-company valuations are creating an opportunity for public-to-private transactions. We expect that PEs, which are flush with abundant capital, will be actively pursuing M&A in health industries over the next six to 12 months.
Companies in health industries will continue to look to acquisitions to achieve their growth plans. However, antitrust scrutiny from regulators, particularly in the US, UK, Europe and Canada, has made transformative megadeals more difficult to complete. Most companies will find they need to undertake a higher number of smaller transactions to achieve the same outcomes, such as pharma companies acquiring multiple medium-sized biotechs or PE funds creating specialist care platforms through a series of roll-up acquisitions.
M&A activity in health industries will remain high despite an unpredictable macroeconomic and sociopolitical climate. PE funds have significant dry powder to deploy, and large corporates remain committed to growth through M&A and appear undeterred by recent declines in stock prices, rising interest rates or inflation. This capital will compete to buy small and midsize innovative companies that unlock access to new technologies and digital capabilities. All this suggests a busy time ahead for dealmakers in the remainder of 2022.