Healthcare M&A on the road to recovery in Q2

Confidence in pharma M&A is on the rise following a lackluster second half of 2016

A cautious optimism is returning to healthcare dealmaking. The sector has seen three consecutive quarterly increases in value to reach US$89 billion across 288 deals in Q2. A total H1 value of US$163.4 billion was a near 50% increase on the previous half year. As a consequence, the sector ranked third in the global sector league table by value, up from fifth in 2016.

This growth was driven by higher priced deals as companies rush to consolidate and stay ahead in a competitive market. There were seven megadeals worth a total of US$89.3 billion announced in H1—a marked increase from the US$36.6 billion spent in the second half of 2016.

This trend for higher-priced deals was seen in the Medical subsector, which generated the biggest deal of Q2: medical supplies company Becton, Dickinson & Co.’s US$24 billion agreement to buy rival C.R. Bard. Driven by increasing pressure placed on suppliers to consolidate, reduce prices and create larger product portfolios, healthcare companies have increasingly turned to M&A.

Unsurprisingly, the US was the center of activity, with eight out of the top ten healthcare deals of the quarter targeting US firms. This dominance looks set to continue, buoyed by President Trump’s proposals to cut corporate tax rates and repatriate cash from overseas. However, it is unclear how the new administration will address some of the antitrust issues that held back deals in 2016.

Although there is a degree of political uncertainty facing deals, the drive to consolidate will continue to generate transactions in the second half of the year.

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