What does M&A look like for the Life Sciences industry this year?
Should lawyers expect another quiet period?
Are we set for another year of decline accompanied by bearish dealmaking?
Let's take a look...
We've all seen the countless articles and LinkedIn posts about M&A teams dwindling in the face of the UK's rocky markets with deals reverting to pre-pandemic levels. As a practice area, M&A appears to be feeling the effects of unstable economies globally.
Oil & Gas M&A hit a 17-year low in the US (unsurprisingly), the value of Food & Beverage M&A deals fell by 70% in 2022 in the UK, and Cybersecurity M&A activity saw a 12% drop in APAC last year - every single industry appears to be struggling. There has been a considerable drop in deal activity in 2022 in comparison to the post-Covid boom of 2021, and many industry experts are anticipating similar stats as the UK does its best to fend off a recession.
The Life Sciences sector saw some similar disappointments last year. Taking a look at the Medical Device M&A landscape, things started off strong in Q1 and Q2 but, again, economic uncertainty led to shrinking deal values and volume in comparison to the previous year. 2022 activity was dominated by smaller deals for start-ups and spin-off companies as opposed to the mega-blockbuster deals that we'd become accustomed to seeing. Some sub-sectors, however, led the way last year; IVD and Healthcare IT were two sub-sectors to do particularly well, accounting for over 30% of deals by volume and over 50% by value.
As we are now well into January, however, the question on many minds now is "What will 2023 look like?".
EY recently released a new report that predicts 2023 to be a far more active year for Life Sciences deals. Early signs of activity already began to unfold at the backend of 2022 when Amgen announced its plans to acquire Horizon Therapeutics for $28.5bn. Another notable, but smaller, deal at the start of this year was AstraZeneca acquiring CinCor for $1.8bn.
So, what is it about the Life Sciences sector that makes it prime for an increase in M&A deals this year? There are 3 key factors that seem to differentiate it from other industries:
1. Deployable Capital.
This is where the sector truly sets itself apart. According to EY, the biopharma industry alone holds over $1.4trn in deployable capital - this is an 11% increase on 2021's stats and the highest level recorded since 2014. We're talking more money being ready and waiting to be spent on acquisitions and deals this year...fingers crossed.
2. Lower Valuations.
Yes, 2022 was a slower year, but this might actually have set things up very nicely for 2023. Valuations have been dragged down and companies are now incentivised to acquire considerably 'cheap' targets. PE funds are also starting to turn to Life Sciences in their hunt for attractive deals, and this will likely only continue.
3. Innovation.
I'm sure it comes as no surprise, but the Life Sciences sector is known for promoting ongoing innovation. There are continual advancements in cell and gene therapies, mRNA, digital technologies, data analytics, and more that are birthing new start-ups and products. There just isn't an industry quite like it.
Clearly, things are looking up and there are definitely busy times ahead. Notably, here at Sonder, we've already caught up with firms that are specifically looking for M&A lawyers with experience working with Life Sciences clients. There's room at the top and the best teams are pre-empting an increase in workload this year.
If you want to learn some more about the market, who's hiring, and how to best position yourself to get involved in the action feel free to reach out to me at tito.ayantunde@sonderconsultants.com.
