Life sciences M&A reached peak levels and a near-record total deal value in 2021, fueled by a boom in private equity investments and industry appetite for growth. These business conditions set the stage for a robust period of dealmaking even as the M&A market moves closer to pre-pandemic norms.

Mintz, an Am Law 100 law firm, and Mergermarket, a global provider of M&A data and intelligence, explore this exceptionally strong dealmaking period and the evolving market in our new report on M&A in the life sciences sector. We provide data on deal volume and valuation of life sciences mergers from 2017 through Q1 2022, with a particular emphasis on 2021 deals. In addition to analyzing the numbers, we also share the results of our in-depth survey of 100 senior-level, US-based executives – both buyers and sellers.

Our findings show a landscape where expansionary dealmaking is shaped by pandemic trends, including new technology deployment and strong revenues. Other emerging trends include the industry’s embrace of partnerships as an M&A alternative and the growing focus on cultural and personnel issues as key items that need careful planning during the post-merger integration process.  

Deal Drivers

Securing new treatment and product pipelines has become a top M&A rationale as dealmakers look to capitalize on the accelerated pace of R&D stimulated by the COVID-19 pandemic. This industry-wide focus on M&A for expansionary reasons pushed defensive motivations for deals, such as cost-cutting and offsetting losses in market share, further down the list of priorities this year.

Despite strong industry drivers favoring deals, pricing dynamics shifted with the drop in stock market valuations and the cooler M&A market in Q4. As a result, just 42% of respondents received more than their target buyout price — down from 64% last year.

Partnerships on the Rise

The search for new ways to bring innovations to market and expand R&D pipelines is prompting life sciences companies to pursue all types of partnerships, collaborations, and licensing and development deals. In this year’s survey, a much higher percentage of respondents considered entering into a partnership — and many formed partner arrangements with several other companies. Here is some of what our respondents say about partnerships:

  • The vast majority of respondents have had positive experiences with partnerships formed in the past 18 months, with 90% of buyers and 86% of sellers reporting that the experience increased their appetite for future partnerships.
  • Multiple partnerships are seen as a preferable alternative to serial M&A deals, with 50% of buyers and 33% of sellers reporting the formation of partnerships with three or four life sciences companies in the last year-and-a-half.
  • 64% of buyers and 58% of sellers expect the growth of partnerships to outpace that of M&A deals in the US life sciences industry over the next 18 months due to the flexibility of alliances and participants’ ability to avoid deal failure or antitrust scrutiny.

Post-merger Integration Challenges

The ongoing pandemic continues to complicate M&A deal integrations, especially in relation to strategy formulation, due diligence, and the creation of a cohesive combined company. Although recent integrations have taken longer, a higher percentage of this year’s respondents reported successful outcomes. Here is more of what we learned about the post-merger landscape for life sciences companies:

  • In a marked increase over the prior year’s findings, post-deal integration took between 7 and 12 months for 55% of respondents and more than a year for 14%.
  • Designing the combined organization, achieving specific cultural goals, establishing a common culture, and employee relations issues were the four most-cited post-merger integration challenges by all respondents.
  • Despite the complexities of merging in the current environment, 37% of respondents say their most recent integration was successful, up from 26% last year.

For more insights on M&A from pharma, biotech, and med device executives, plus historical and recent deal data, we invite you to read the report.

Click here to access the full report.