3 minute read 16 Apr 2018
old and new

Why life sciences M&A optimism resulted in record first quarter


Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.

3 minute read 16 Apr 2018

Life sciences executives continue their confidence in M&A, with 50% planning to pursue deals, notes our merger and acquisition report.

This article is part of our M&A report Global Capital Confidence Barometer, 1st half 2018.

The M&A optimism and appetite we saw in October resulted in a record first quarter. Year to date, US$150b in life sciences deals have been proposed. Expectations continue to be positive, with 50% of executives planning to pursue mergers and acquisitions in the next year. This is down from the peak of 60% six months ago, but well above the sector average of 42% over the last eight years, according to the EY Global Capital Confidence Barometer.

Life sciences M&A


plan to pursue M&A in the next year

Executives' desire to focus on core innovation helped drive the deals announced so far this year. No subsector marks this more obviously than consumer health, where big pharma players such as Pfizer, Novartis and Merck KGaA have divested or are looking to divest their consumer health businesses. The proceeds from these disposals are being deployed to revitalize portfolios and reduce debt.

Life sciences portfolio transformation


see portfolio transformation, including both buying and selling assets, as the most prominent boardroom issue

Record dealmaking announcements despite some challenges

This record start to the year has not been without its challenges. Seventy-six percent of executives highlighted they have either failed to complete or canceled a deal in the last year, motivated by competition or valuation issues.

One of the contributing factors has been the re-emergence of private equity (PE). The current M&A cycle that started in 2013 has been dominated by corporate acquirers. Over the period 2013–16, corporates have accounted for, on average, 98% of the M&A market by value. This tide is turning, with 77% of executives expecting to see even more competition for assets in the next year. Of those executives expecting more competition, 66% expect that competition to come from PE. This trend began to accelerate in 2017 when PE accounted for 6% of the M&A market (in deal value). PE continues to have an appetite for non-core assets from big pharma and medtech, accounting for 3% of the M&A market in the first quarter of this year.

Competitive bid processes are not the only challenges boardrooms need to address. Forty-six percent of executives believe political uncertainty is the greatest near-term risk to the growth of their business. Drug prices continue to be on the political agenda and often in the headlines; however, the continued rise of nationalism and protectionism does not seem to be discouraging companies from cross-border M&A. Thirty-four percent of executives are expecting an increase in cross-border dealmaking over the next 12 months.

Confidence in capital markets continues

Our recent paper on life sciences M&A, 2018 M&A Firepower Report: Life Sciences Deals and Data, highlighted how buoyant capital markets have been for small and mid-sized biopharmas and medtechs, and the potential return of megadeals. The confidence in financial markets continues, with all financial indicators in our survey remaining stable or improving. The proposed tie-up between Takeda and Shire would be the largest deal since the megadeals in 2009 (Pfizer and Wyeth merger), 2013 (Abbott and AbbVie separation) and 2015 (Allergan and Actavis merger).

Executives remain confident about dealmaking over the next 12 months, with 66% expecting the M&A market to improve. A major driver for this centers on the need for life sciences companies to mitigate the next patent cliff and, consequently, transform their portfolios by both buying and selling assets. Seventy-four percent of executives see portfolio transformation as the most prominent boardroom issue.

Making better-informed portfolio decisions in today's data-driven era

Analytics, artificial intelligence and real-time data gathering are allowing companies to make better-informed decisions about their portfolio. Seventy-six percent of executives say the main result of their portfolio review was divesting an asset identified as underperforming or at risk for disruption.

In our just-published paper, Progressions 2018: Life Sciences 4.0 — Securing value through data-driven platforms, we discuss the capabilities life sciences companies need to succeed in today's data-driven era. Our analysis shows that to avoid disruption from new entrants, life sciences companies must form partnerships to boost their patient engagement, personalization and data skills. Partnerships formed thus far are focused on the creation or enhancement of products and services, or to collect and structure real-world data.

Global Capital Confidence Barometer 

Explore our latest M&A report.

Read more


M&A continues to offer a viable solution for life sciences companies looking to fill gaps in portfolios, gain new sources of revenue, and achieve the customer-centric and digital capabilities needed to participate in platforms of care.

About this article


Steve Krouskos

EY Global Vice Chair – Transaction Advisory Services

Driving growth and investment priorities for global EY TAS. University of Florida alumnus. Son, husband and father of four.