Life Sciences Seeing More M&A Activity

14. January 2015

Global M&A through Q3 2014 totalled US$2,486.1 billion, surpassing totals for the entirety of 2013, with life sciences contributing US$352.5 billion to that number.

The “selfie stick,” a gadget that does exactly what it sounds like it does—basically, a stick that allows people to more easily take selfies—became wildly popular last year, making headlines in various tech publications. Also making headlines last year (and perhaps just as exciting as getting a selfie stick for Christmas)? The continued strength of global M&A, particularly in the European life sciences area, which encompasses pharmaceutical, medical, and biotechnology companies.

“M&A activity has definitely been on an upswing,” says Jan Hoffmeister, co-founder and managing director of Drooms. “Additionally, what’s interesting is that we’re seeing more so-called ‘mega-deals,’ such as the US$43 billion acquisition of Covidien by Medtronic, which received EU approval in late November.”

Upswing indeed. Globally, 2014 M&A deal totals for Q1-Q3 surpassed totals for the entirety of 2013, according to Mergermarket data. With US$2,486.1 billion worth of deals in that time period, records show that 2014 trails only 2006 ($3,295.4 billion) and 2007 ($3,669.7 billion) in terms of annual value. Europe-targeted M&A alone totalled US$714.7 billion.

What’s driving all these transactions? Cross-border deals for one – they comprised almost half (45.6 percent) of global M&A in 2014, says Mergermarket. In particular, inversion deals – in which a company based in one country buys a company in another country that has lower taxes, reducing the purchasing company’s overall tax rate – counted for US$278.9 billion worth of cross-border deals globally.

Additionally, according to Cavendish Corporate Finance partner Gordon Hamilton, factors such as the number of drugs going off patent, as well as the lack of innovation at big pharma companies that then look to buy smaller firms to make up for it, drove deals in the life sciences area, which made up a good chunk of worldwide M&A totals – US$352.5 billion in Q1-Q3, to be exact. In Europe, 77.2 percent of life sciences activity came from foreign bidders in the form of inversion deals from the U.S., totalling US$155.6 billion.

“Deal making in European life sciences likely isn’t going to cool off anytime soon if you take a look at recent reports such as Zephyr’s Monthly Biotech Report,” says Hoffmeister. “Investment in global biotech companies and M&A in the life sciences area appear to be continuing at a fevered pace, with high-value transactions like BioMarin Pharmaceutical’s US$840 million acquisition of Netherlands-based Prosensa Holding announced in November.”