Science and Technology

Healthcare, technology and consumer sectors tipped to dominate global M&A

August 6, 2015

Baker & McKenzie’s Ben McLaughlin expects global M&A in healthcare and pharmaceuticals will continue apace in the next six to 12 months. Photo: Ben Rushton

The healthcare and technology sectors will continue to dominate global deals this year, with consumer discretionary industries also set for more activity albeit at the smaller end of the scale, according to a UBS report.

The volume of mergers and acquisitions (M&A) are tipped to grow by 22 per cent in calendar 2015, reflecting the acceleration of a boom that began in 2014. UBS said the United States was “ahead of the curve” in terms of deal activity, but M&A in Europe may be buoyed by a decline in political uncertainty and a continued earnings improvement from companies there. In the Asia Pacific region, UBS said while there was unlikely to be a “substantial increase” in transactions, there were a number of factors that would underpin activity.

“A renewed emphasis on shareholder value in Japan and further SOE (state-owned enterprise) reform in China could prove to be a catalyst for incremental M&A activity,” the report added.

The healthcare sector, fuelled by a raft of mega-deals, was the top targeted industry grouping with transactions totalling US$346.7 billion ($472.97 billion) in the first half of 2015, according to Dealogic. That was a record first-half period for the global healthcare industry, which has been the leading sector in three of the past five quarters. The oil and gas sector was the second most targeted sector and technology-related industries third.

Pharmaceutical sector

The deal frenzy in the global pharmaceutical sector continued this week as Dublin-based Shire lobbed a US$34 billion hostile bid for Baxalta, the drug maker spun out from healthcare group Baxter. Shire itself was a target of a takeover offer by US company AbbVie last year, one of several mooted deals that fell over in the sector in 2014.

UBS tipped that global consumer-related M&A would be driven by smaller deals, as acquirers sought out revenue and cost synergies, new technologies and access to new customer groups.

In Australia, it’s been a very different picture so far in 2015. The most targeted local sector on Dealogic numbers is transportation with deals amounting to US$16.2 billion, followed by mining and real estate and property. The healthcare and technology industries rank in seventh and 10th spots respectively.

Tilts for local companies including Asciano and Toll Holdings have kept advisers busy in 2015, while privatisations occurring in states, such as NSW are also being closely watched.

Law firm Baker & McKenzie expects global M&A in healthcare and pharmaceuticals will continue apace in the next six to 12 months, particularly after several large transactions were abandoned in 2014.

“There is a way to go yet,” Baker & McKenzie’s Ben McLaughlin, who heads the Asia Pacific pharmaceuticals and healthcare group, said.

Medical technology

Co-head of the firm’s local life sciences group Amanda Turnill? identified health-tech as another busy area.

“We will continue to see activity in the convergence of medical technology,” she said.

Mr McLaughlin said moves toward a Trans-Pacific Partnership and greater harmonisation in the Association of South-East Asian Nations, would see more Australian health companies looking to make acquisitions or to export processes and systems into the region.

“We see opportunities that are not being taken in south-east Asia,” he added.