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New heights: US M&A H1 2021
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Insight

Healthcare displays strong deal activity post-pandemic

The value of healthcare M&A in H1 surpassed pre-pandemic levels

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US $174 billion

The value of 435 deals targeting the US healthcare sector in H1 2021

 

Healthcare M&A (including pharma, biotech and medical) saw strong growth over the first half of  2021 as investors continued to pursue deal opportunities in a sector that has played a crucial role in managing the pandemic.

Total healthcare deal value reached US$174 billion in the first half of the year, a 319 percent increase on H1 2020 and above pre-pandemic levels (H1 2018 saw US$71.3 billion in deal value; H1 2017 saw US$98.3 billion). The substantial rise in deal value comes alongside an increase in deal volumes, which increased 24 percent on H1 2020 levels to come in at 435 transactions.

Essential healthcare products and services have been in high demand through the COVID-19 dislocation period, with healthcare groups able to continue offering good visibility on future earnings as a result. The sector has also enjoyed steady growth in areas such as tech-enabled healthcare.

The strength of healthcare stocks has given corporates the confidence to push forward with M&A activity. Healthcare groups have recognized the value of scale after COVID-19 demand stretched capacity.

319%

Percentage increase in deal value in H1 2021 compared to the same period in 2020

 

PE and SPACs show appetite

SPACs and private equity firms have also been active in the healthcare space, attracted to the sector’s resilient earnings and long-term growth trajectory.

In a clear sign of the strong position of the private equity sector in 2021, healthcare saw the largest US buyout deal since the financial crisis in H1—the US$34 billion takeover of Medline by a group of PE investors.

The deal will see the consortium—Carlyle, Blackstone, Hellman & Friedman and GIC, the Singapore sovereign wealth fund—take over the largest privately held medical supplies manufacturer in the US.

Nor are PE funds the only ones willing to back big deals—strong public market performance has encouraged SPAC activity in the industry. Soaring Eagle Acquisition Corp., a SPAC headed by former MGM CEO Harry Sloan, acquired Boston-based biotechnology group Ginkgo Bioworks in a US$15 billion deal, in the third-biggest deal of the year in the sector. Ginkgo was founded by a team of scientists from MIT and produces DNA and microbes that customers can order and use in the development of their products.

Other notable SPAC deals include direct-to-consumer genomics firm 23andMe’s US$3.6 billion merger with VG Acquisition Corp. and Fortress Value Acquisition Corp. II’s US$2.4 billion merger with physical therapy clinic chain ATI Holdings.

 

Interest in research organizations rise

In the pharmaceuticals and biotech sub-sector, M&A has been an important tool for pharmaceutical companies to replenish their pipelines as blockbuster drugs go off patent, while the contract research organization (CRO) space has seen a wave of consolidation as providers of outsourced research services to the pharmaceuticals industry seek to build scale.

The second and fourth largest transactions of the sector were emblematic of this trend. Thermo Fisher, a producer of laboratory equipment as well as COVID-19 diagnostic test kits, acquired CRO PPD for US$21 billion, while Irish CRO ICON bought US counterpart PRA Health Services for US$12.1 billion.

Top healthcare deals H1 2021

  1. The Carlyle Group, Hellman & Friedman, Blackstone Group, and GIC Private Limited acquired Medline Industries for US$34 billion
  2. Thermo Fisher acquired PPD for US$21 billion
  3. Ginkgo Bioworks merged with Soaring Eagle Acquisition Corp, a SPAC, for US$15 billion

 

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New heights: US M&A H1 2021

 

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