NEW YORK, May 26, 2016 /PRNewswire/ -- The M&A market in the global life sciences sector is in the middle of a "renormalizing" period, according to the findings in EY's 14th Global Capital Confidence Barometer (CCB): Life sciences highlights, which surveyed 113 life sciences industry leaders around the world, 49% of them C-level executives.
Almost half (45%) of life sciences executives surveyed plan to actively pursue deals in the next 12 months despite easing mergers and acquisitions (M&A) expectations in the industry. Fifty percent of those surveyed report healthy pipelines of three or more deals in the making, a strong indication that the M&A boom is far from over, following the record-breaking 2015 globally.
Jeff Greene, EY's Global Life Sciences Transaction Advisory Services Leader, says:
"This coming year will see deal activity vary greatly across the life sciences industry and its subsectors. After its inversion-focused acquisition spree in the last few years, specialty pharma will see more tempered volumes as it continues to digest acquisitions and prune portfolios. Driven by declining valuations and relatively high debt levels, many specialty pharma players are contemplating divestitures. In contrast, biotech may have a bullish M&A run this year, spurred by the joint forces of slowing growth among big biotechs and falling valuations among small to mid-sized biotechs."
To illustrate the ongoing appetite, 58% of industry leaders surveyed say acquisitions and/or divestitures are topping their boardroom agenda. Notably, divestitures were cited almost equally as high a priority (27% of respondents) as acquisitions (31% of respondents). This sentiment is shared with organizations in subsectors, such as specialty pharma, which is refocusing on core assets, and where 38% report that distressed and stressed asset sales will play a more prominent role in future M&A. Additionally, 35% of industry leaders expect hostile bids to become a more prominent dealmaking feature in the next 12 months, which is especially likely for subsectors experiencing growth spurts, such as biotech.
More than half of biotech executives (53%) surveyed are actively pursuing deals. This figure is up 17 percentage points from six months ago. The medtech subsector is also anticipating an uptick in M&A activity, with more than half of those surveyed (53%) planning to pursue acquisitions in the next 12 months. Meanwhile, more than half of medtech executives anticipate to actively pursue dealmaking over the next 12 months as they continue to benefit from the elimination of the excise tax of the Affordable Care Act in the US.
Greene says, "Not surprisingly, pharmaceutical M&A deals will be more subdued this year as big pharma becomes more selective in its dealmaking. Yet big pharma still has relatively strong M&A firepower and its need for filling growth gaps may spawn some hostile bids for deal targets, such as those in the surging biotech subsector."
To view the report online, go to: ey.com/ccb
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About the Global Capital Confidence Barometer – Life sciences
The Global Capital Confidence Barometer gauges corporate confidence in the economic outlook and identifies boardroom trends and practices in the way companies manage their Capital Agendas — EY's framework for strategically managing capital. The Barometer is a regular survey of senior executives from large companies around the world, from many industries, conducted by the Economist Intelligence Unit (EIU). In February 2016 and March 2016, we surveyed more than 1,700 executives in 45 countries. In this survey, we had 113 respondents from life sciences companies, of which 49% were CEOs, CFOs and other C-level executives. A full copy of the report is available at ey.com/vitalsigns.
How EY's Global Life Sciences Sector can help your business
Life sciences companies — from emerging start-ups to multinational enterprises — face new challenges in a rapidly changing health care ecosystem. Payers and regulators are increasing scrutiny and accelerating the transition to value and outcomes. Big data and patient-empowering technologies are driving new approaches and enabling transparency and consumerism. Players from other sectors are entering health care, making collaborations increasingly complex. These trends challenge every aspect of the life sciences business model, from R&D to marketing. Our Global Life Sciences Center brings together a worldwide network — more than 7,000 sector-focused assurance, tax, transaction and advisory professionals — to anticipate trends, identify implications and develop points of view on responding to critical issues. We can help you navigate your way forward and achieve success in the new ecosystem.
For more timely insights on the key business issues affecting life sciences companies, please go to ey.com/VitalSigns. You can also visit ey.com/lifesciences or email firstname.lastname@example.org for more information on our services. To connect with us on Twitter - @EY_LifeSciences.
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