RR Donnelley’s August 2016 VENUE Market Spotlight focused on the healthcare industry and the prospects for M&A activity in that space over the next 12 months. The report notes that there were 678 healthcare transactions in the first half of 2016 with an aggregate value of US$171.3 billion globally. These figures represent declines of 5% and 6%, respectively, from the same period in 2015, though they are up significantly from 2014, and respondents to the survey indicated that they expect investments in digital health, biotechnology and medical devices to increase in the future.

According to the report, global factors driving the health care industry include the fact that there will be 500 million more people aged 60 and over by 2030 and that 60% of the world’s population will be considered middle-class by that year, whereas only 30% were considered as such in 2012.

Respondents to the survey also shared the following opinions on what they see happening in the healthcare industry over the next 12 months:

  • 64% of respondents believed that digital health is the industry sub-segment that will see the largest increase in M&A activity, followed by medical devices (52%); biotechnology (40%); pharmaceuticals (20%); hospitals and outpatient clinics (16%); and insurance companies (8%) (respondents were asked to select their top two choices).
  • 64% of respondents view acquisitions of synergistic technology or data as the top deal driver, followed by consolidation to reduce costs (56%); desire to expand into new geographies ($8%); effects of the U.S. Affordable Care Act (Obamacare) (12%); sales and divestments to reduce debt burdens (12%); and the low cost of deal financing (8%) (respondents were asked to select their top two choices).
  • 80% of respondents view regulatory issues as the most significant barriers and challenge to M&A activity in the healthcare space, followed by geopolitical and macroecnomic uncertainty (factors include Brexit and the U.S. presidential election) (68%); high valuations and low profitability of potential targets (48%); and a shortage of interested buyers (4%).
  • 52% of respondents see the Asia-Pacific region as the market which will experience the most M&A activity in the next 12 months, followed by Europe and North America, both at 24%. The report notes that Asian countries have seen an increase in deal value from an annual average value of US$15.2 billion in 2007-2013 to US37.8 billion in 2015.
  • 56% of respondents believe that private equity investments in the healthcare industry will increase only somewhat in the next 12 months, whereas 28% believe it will increase significantly. The numbers of respondents who felt private equity investments would remain the same or decrease somewhat were tied at 8%.
  • 52% of respondents believe there will be somewhat of a decrease in IPO activity in the sector, whereas 8% believe there will be an increase in such activity. Respondents who believe IPO activity will stay the same or decrease significantly both equalled 20%.

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