The rise in volume and value seen for merger and acquisition activity in the pharmaceutical and life sciences (PLS) sector during fourth-quarter 2013 is set to continue, PricewaterhouseCoopers forecasts.
2013 finished on a high note for deal activity, and the quarter’s momentum, driven by macroeconomic stability and growth in key markets, will continue into 2014 as acquirers remain active in the market, the firm predicts in a new analysis.
‘We’ve seen a continued focus on successful execution, and PLS companies are continuing to use earn-outs and other deal tools to bridge value gaps, share risk and complete deals,” comments Dimitri Drone, US pharmaceuticals and life sciences deals leader at PwC.
Fourth-quarter 2013 saw 31 PLS transactions, up 24% over the third quarter’s 25. And total deal value jumped more than 100% to $37.1 billion, from around $18 billion for both third-quarter 2013 and fourth-quarter 2012.
There were 15 fewer deals (11%) in 2013 than 2012, but their value rose nearly 46% to total more than $140 billion, even though the PLS sector experienced none of the mega-deals which have prevailed in years past. Rather, large drugmakers focused on rebuilding their product pipelines through acquisitions of relatively smaller biopharmaceutical players, as well as balancing their own product portfolios and seeking to unlock value through divestitures, says PwC.
Some 11 divestitures - worth a total $3.8 billion - were completed in fourth-quarter 2013, and they continue to be a key component of PLS companies’ strategies to maximise shareholder value. Additionally, strategic buyers continue to account for the majority of M&A activity in the PLS sector, the report notes. While financial buyers remain active in deal processes, potential synergies and other benefits of transactions have driven a higher rate of success for strategic acquirers, it says.
Looking at individual PLS industry sectors, PwC finds that medical device manufacturers remained active in M&A, with 15 deals in fourth-quarter 2013, while the diagnostics and services sectors remained relatively quiet throughout the year. Pharmaceutical companies completed 12 deals in the fourth quarter, and continued to face increased competition in deal-making from biotechnology companies seeking to gain scale and mitigate risk through a more diverse product portfolio.
“Looking forward, healthy balance sheets, access to financing and strong equity markets will allow PLS deal-makers to continue to seek opportunities to grow through acquisition across industry sectors in 2014,” Mr Drone concludes.