Medical device manufacturers and pharmaceutical companies drive majority of deal activity
NEW YORK, February 10, 2014 – Pharmaceutical and life sciences (PLS) merger and acquisition (M&A) volume and value increased in the fourth quarter of 2013, finishing the year for deal activity on a high note, according to Pharmaceutical and Life Sciences Deals Insights Quarterly, a quarterly analysis of M&A trends and outlook for the PLS sector issued today by PwC.
"We expect the momentum of M&A activity in the fourth quarter, driven by macroeconomic stability and growth in key markets, to continue into 2014 as acquirers remain active in the market. Working with clients on their M&A strategies, we're seeing 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," said Dimitri Drone, U.S. Pharmaceutical and Life Sciences Deals Leader, PwC.
There were 31 PLS transactions in the fourth quarter of 2013, a 24 percent increase compared to 25 deals in the third quarter of 2013. Total deal value also jumped more than 100 percent to $37.1 billion in the fourth quarter compared to approximately $18 billion in both the third quarter of 2013 and the fourth quarter of 2012.
On an annual basis, deal volume decreased by 15 deals - or 11 percent - in the full year of 2013, but deal value rose nearly 46 percent compared to 2012. While deal values totalled more than $140 billion in 2013, the PLS industry didn't experience any mega deals that were prevalent in years past. Rather, large pharmaceutical companies 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, according to PwC.
Eleven divestitures were completed in the fourth quarter of 2013, representing a total value of $3.8 billion, as they continue to be a key component of PLS companies' strategies to maximize shareholder value. Additionally, strategic buyers continue to account for the majority of M&A activity in the PLS industry. While financial buyers remain active in deal processes, the report notes that potential synergies and other benefits of transactions have driven a higher rate of success for strategic acquirers.
Looking at the PLS industry sectors, medical device manufacturers remained active in M&A with 15 deals in the fourth quarter, which were primarily in middle-market transactions, as they sought to complement existing product portfolios with innovative technologies. While pharmaceutical companies represented 12 deals in the fourth quarter, they continued to face increased competition in deal-making from biotechnology companies seeking to gain scale and mitigate risk through a more diverse product portfolio. The diagnostics and services sectors remained relatively quiet in the M&A market throughout 2013; however, these sectors may see a return to deal-making over the next year.
"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," concluded Drone.
PwC's Deals practitioners help corporate and private equity executives navigate transactions to increase value and returns. In today's increasingly daunting economic and regulatory environment, our experienced M&A specialists assist clients on a range of transactions from smaller and mid-sized deals to the most complex transactions, including domestic and cross-border acquisitions, divestitures and spin-offs, capital events such as IPOs and debt offerings, and bankruptcies and other business reorganizations. We help clients with strategic planning around their growth and investment agendas and advise on business-wide risks and value drivers in their transactions for more empowered negotiations, decision-making and execution. We help clients expedite their deals, reduce their risks, capture and deliver value to their stakeholders and quickly return to business as usual. Our local and global deal strength is derived from over 1,500 deal professionals in 35 cities in the U.S. and over 13,400 deal professionals across a global network of firms in 75 countries. In addition, our network firm PwC Corporate Finance provides investment banking services within the U.S. For more information, visit www.pwc.com/us/deals.
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