Global health industry’s $1t war chest to drive 2020 deal boom: EY

Photo by Louis Reed on Unsplash

The health industry’s more than $1 trillion in “firepower” should deliver another strong year for deals, a new report shows.

Big biotechnology firms and their medical technology brethren will be active dealmakers in 2020 as companies look to fuel needed growth, according to a report released Monday by professional services firm EY. Cell and gene therapy firms are expected to continue to dominate biotech deals. EY sees the potential for almost $300 billion in deals even without a repeat of 2019’s mega-mergers.

“To continue the record-setting M&A trajectory, companies outside big pharma must return to the dealmaking table and make transformative bets of their own,” analysts led by Pamela Spence and Peter Behner wrote. Their findings suggest that most of the largest biopharma companies have the ability to do bolt-on deals with about one-third having the capacity for mega-mergers, defined as transformative deals with valuations of at least $40 billion for biopharma and $10 billion for medtech.

The report comes just hours before the annual JPMorgan Healthcare Conference kicks off in San Francisco. The event has long been a top spot for companies to showcase new deals and for executives to rub elbows with bankers and lawyers.

In a September survey, 94% of respondents told EY that they expect deals to either increase or stay flat over the next year. The normal benchmark for biotech and medical technology deals since 2015 is about $200 billion a year.

Firepower remains plentiful and we expect to see more activity in medtech and big biotech, with mega-mergers coming from companies with acute growth gaps,” Behner said in a statement. “Market volatility and the desire to deepen therapeutic focus will continue to be deal catalysts in 2020.”

The firm defines “firepower” as a company’s capacity to fund deals, including its cash, existing debt, debt capacity and market valuation.

Large biotech companies have historically preferred to return cash to investors via share buybacks rather than deals. Share repurchases and research and development accounted for roughly 80% of their spending in 2019 compared to just 9% on mergers and acquisitions.

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.