Global M&A Insights in Health Industries

Health industries M&A is set to rebound in 2023, with investors attracted by innovation and growth prospects.

We expect dealmaking to reset to more normal levels in 2023 following a challenging year for both pharmaceuticals and life sciences (PLS) and healthcare services (HCS) M&A in 2022. Abundant capital held as cash on corporate balance sheets and in the form of private equity (PE) dry powder will fuel M&A activity over the year as buyers compete for innovative assets.

Companies in health industries will need to make acquisitions to achieve their growth plans. We expect large-cap pharmaceutical companies will seek to fill existing gaps in their development pipelines with early-stage biotech acquisitions. While lower public company valuations may restrict corporate players’ dealmaking capacity for larger transactions, they may also create opportunities to acquire innovative assets at more attractive prices.

The difficult macroeconomic environment, staffing shortages and inflation will likely motivate independent healthcare clinics to join consolidation platforms, especially private hospitals and medical nursing homes. Other recent roll-up platforms, such as veterinary clinics and radiology practices, will continue to consolidate in a market that remains highly fragmented. Meanwhile, telehealth, healthtech and healthcare analytics companies that can further mitigate staffing issues and enable providers to deliver cost-effective, high-quality care will likely attract strong investor interest.

Health industry image

“While macroeconomic conditions may remain challenging in 2023, a resetting of valuations and the need for health industries companies to innovate and transform their businesses to achieve their growth goals and stay ahead of competitors will create a compelling case for M&A.”

Christian MoldtGlobal Health Industries Deals Leader, Partner, PwC Germany

M&A hot spots

We expect the following areas to be M&A activity hot spots during the next six to 12 months:

Pharmaceutical and life sciences

  • Biotech acquisitions to fill pipeline: As large-cap pharma companies look for M&A opportunities to achieve their growth plans, midsize biotech companies (in the US$5bn–$15bn value range) that can fill in pipeline gaps in the back half of the decade will receive significant attention in 2023. However, only a limited number of truly innovative assets are available, and valuations and competition for these businesses will remain high. We expect more small to midrange deals and the formation of joint ventures, rather than takeovers of larger companies, to continue to dominate M&A activity.
  • Divesting to invest: Large pharmaceutical conglomerates will continue to reshape their portfolios and identify non-core assets to divest. Rising interest rates and declining stock prices may put more pressure on corporate divestiture plans to help generate cash to fund new investments in an effort to optimise portfolios and more closely align them with their core competencies.
  • CRO, CDMO and medtech: We expect PE will remain involved and compete with corporates for contract research organisations (CROs), contract development and manufacturing organisations (CDMOs), and medical technology (medtech) companies. Strong cash flows will likely make these sectors attractive investments in 2023, with competition for companies with mRNA or cell and gene therapy capabilities continuing to be fierce.

Healthcare services

  • Consumer-facing healthcare: Companies focused on vitamins, minerals and supplements and on nutraceuticals will remain attractive assets in 2023, especially as recently spun-off pure-play consumer health and over-the-counter businesses seek to accelerate their own transformation plans via mergers and acquisitions.
  • Distressed deals: The significant government support that certain healthcare sectors received during the pandemic has ended or is being reduced. This could lead to an increase in distressed deals, particularly in the hospitals sector, where many operators are facing significant operational challenges due to persistent labour shortages.
  • Telehealth and digitalisation: Staffing challenges, exacerbated during the pandemic, have put further pressure on healthcare providers to find digital efficiencies to help bridge the gap left by a shortage of skilled employees. Telehealth, health tech and analytics companies will continue to be attractive assets to invest in as a means to help fill these value gaps.

Key themes driving M&A activity in 2023

Seeking certainty in the face of macroeconomic and geopolitical challenges

Slowing GDP growth, inflation, interest rate increases, the war in Ukraine and China’s evolving COVID-19 situation have combined to create a challenging deals environment. Supply chain disruption from the global pandemic and growing geopolitical tensions have led business leaders to reassess risks and dependencies and turn to M&A to gain more control. In 2023, we expect to see more onshoring, nearshoring or ‘friendshoring’ of supply chains through M&A as a strategy to reduce lead times and provide greater certainty to customers.

Portfolio optimisation and capital allocation

Amid an uncertain macroeconomic and regulatory environment, we expect companies to continue to strategically evaluate and identify non-core assets for divestment. The proceeds from these divestments will then increase companies’ dealmaking capacity as they seek to acquire assets that align with their strategic visions.

Filling and accelerating the R&D pipeline

In addition to research and development (R&D) activity, pharma companies will seek to address gaps in their drug pipelines by directing capital towards medium-size biotech companies. To further accelerate realised gains from such investment, pharma companies will need to be ready to rapidly integrate and scale up their M&A assets, directing capital towards medium-size biotech companies, as well as efforts to accelerate digital transformation in R&D such as AI in drug discovery.

Roll-up and restructuring in fragmented sectors and distressed assets

Private clinics, specialist care providers and services groups such as ophthalmology, in vitro fertilization, nursing homes and elderly care remain fragmented. Private equity has shown an interest in consolidating these types of assets into platforms, and we expect further roll-up activity to take place in 2023. Staffing shortages and the end of governmental pandemic support in these sectors, as well as among hospital providers, is creating operational and liquidity challenges that could lead to an increase in restructuring or distressed M&A.

Consumerisation and digitalisation of healthcare

Business models within health industries continue to digitalise through analytics technology, smart health devices, healthcare practice management software and consumer-centric delivery models (including developing direct-to-customer digital therapeutics offerings). Acquiring these capabilities is driving cross-sector deals as established players modernise their business models. PLS and HCS firms are increasingly acquiring or partnering with technology companies to leverage digital solutions—including mining and monetising large data sets of patient information—to enhance interactions and offer a more personalised approach to payers, providers and consumers. In addition, we expect PLS players to engage in tech venturing as a means of expanding into the digital sales channel by continuously monitoring the startup sector and engaging in diverse activities from funding to acquiring.

Environmental, social and governance considerations

Private equity companies in particular have made ESG commitments to investors that will form an important part of their investment theses. Companies in health industries offer attractive ESG investment opportunities because they satisfy many of the evolving criteria of investors, stakeholders and governmental institutions to provide a clear contribution to global societal challenges. We expect a broader range of dealmakers to continue to incorporate ESG topics into their business models and due diligence processes.

Health Industries M&A 2023 outlook

We expect dealmaking activity in health industries will stabilise in 2023. Despite the uncertain macroeconomic conditions, investors remain attracted to the sector. Companies that use M&A as a tool to transform or reposition their businesses will be well placed to create long-term value and sustained outcomes for their stakeholders.


About the data
We have based our commentary on data provided by industry-recognised sources. Specifically, values and volumes referenced in this publication are based on officially announced transactions, excluding rumoured and withdrawn transactions, as provided by Refinitiv as of 31 December 2022 and as accessed on 2 January 2023. This has been supplemented by additional information from Dealogic and our independent research, and includes data derived from data provided under licence by Dealogic. Dealogic retains and reserves all rights in such licenced data. Certain adjustments have been made to the source information to align with PwC’s industry mapping. 

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