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10 October, 2019 - 11:12 By Kate Sweeney

Healthcare market activity still strong, reports RSM

RSM – global mid-market leader in audit, tax and consultancy – reports that aggregate mergers and acquisitions (M & A) value across Europe and North America in healthcare has hit nearly $180 billion for the first half of 2019, comparing favourably to last year’s total of $366bn. 

However, volume is somewhat slowing going into Autumn as the time taken to close deals across the market overall seems to have increased. 

Nevertheless, there is still activity, and this has been seen recently with LifeArc’s equity investments in Kymab earlier this summer or alternatives to direct M & A deals such as Sosei Heptares entering into collaborations with Takeda and Genentech.

Between private equity groups and strategic M & A acquirers, the factors influencing time taken to close deals can differ, but two interesting trends point to policy and pricing. 

Ongoing uncertainty around potential policy shifts that would decrease the size of the insured population (particularly in the US), as well as additional regulatory burden endemic to the industry globally, have further complicated deal making and required extra due diligence. 

Proper due diligence, especially given increasing concern around cybersecurity, will remain a necessary challenge for dealmakers on both the strategic and financial sides. 

The supply of companies and practices coming to market does not look set to slow any time soon. As PE portfolio acquisitions continue apace and eventually feed into the prospective deal pipeline, there will be a steady stream of potential targets. 

Although the pace of closing deals will be quiet, the M & A cycle looks set to continue at a healthy level for the foreseeable future.

Moreover, valuations across the board are increasingly high, in no small part due to the amount of capital buyers can access as they come to market. 

Laragh Jeanroy, office managing partner for RSM in Cambridge and a life science focussed audit partner, comments: “Indicators globally, and especially in the US, are that there is more cash out there than there are good deals available. That should be welcome news for sellers as they come to market, but it doesn’t make things easy for buyers.”

As deals take longer to close, it is important to ensure proper due diligence is planned and executed early in the process, both on the financial and commercial side. 

“For health care deals in particular, there are additional regulatory concerns investors have to navigate which can increase the complexity on a due diligence,” says Laragh. 

As healthcare organisations continue to struggle with the costs of technology and compliance, mergers and acquisitions (M & A) have become an avenue for revenue and market share growth. 

How can healthcare organisations navigate the complexities of their M & A challenges and opportunities? 

Laragh said: “It’s important to get external support from financial and legal advisers who are experienced in the sector. That’s where a firm such as RSM can really support Healthcare businesses. 

“In the last 12 months we have supported Prism Medical UK Limited on two recent acquisitions, advised on the acquisition of Digital Healthcare Ltd, Medical Imaging UK Ltd and MIDRSS Ltd by Northgate Public Services (UK) Limited and provided support to Health Care Resourcing Group Limited.”

RSM offers a variety of M & A consulting services for healthcare companies, including pre-deal valuation, due diligence and post-closing allocation, to name a few key service areas.

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