Is there a bright future for M&A in 2024 and beyond?
Jake Henry and Mieke Van Oostende from McKinsey & Company recently discussed, in an article, the trends in Mergers and Acquisitions (M&A) in the life sciences sector. After peaking in 2021, deal value plummeted due to the pandemic but revived in 2023. The key to renewed deal success for pharmaceutical companies was acquiring pre-commercial biotech assets to fuel growth. Medical technology companies improved profitability by proactively shaping their business portfolios.
Between 2011 and 2021, the number of deals in the life sciences sector increased 13 percent a year, and that rate doubled between 2019 and 2021. Deal value peaked at $517 billion in 2021. While deal volume slowed in recent years, dealmaking in life sciences saw an upswing in 2023. The value of transactions jumped 23 percent from a year earlier.
The pandemic shocked the economic system and brought M&A activity to a virtual halt. As the system has revived, so has the pressure on companies to deliver profitable growth. But rising interest rates have complicated debt financing. Small biotechnology companies (biotechs) looked to the financial clout of big pharma companies and private equity players for R&D and product development support.
Many life sciences companies have embraced a programmatic approach to M&A. They execute a steady stream of relatively small, strategic transactions—acquisitions to fill gaps in their portfolios or to enter promising new segments and divestitures to cull businesses that underperform or no longer meet their needs.