While M&A volumes increased to their highest level since Q1 2017, a lack of megadeals resulted in a meaningful decline in deal value relative to the prior two quarters. The Pharmaceutical sub-sector led in deal volume, building on the strength shown in Q2 2018. After a strong 2017, the Other/Services sub-sector continued to see lighter activity in Q3 2018 similar to the levels experienced in the first half of the year.
Corporate divestitures continue to be a primary driver of deal activity, as companies seek to rebalance their product portfolios and monetize certain assets. The spin of Elanco from Eli Lilly (which is not included in the M&A statistics contained within this report) and continued discussions around GE Healthcare highlight the strategic moves made by some of the larger players in the industry. Private Equity buyers continue to be exceptionally active participants as well, bidding on both large and small corporate asset portfolios.
Deal volume increased in Q3 2018 for the second consecutive quarter, following the steady declines experienced since 2016.
While deal volume increased by double digits, Q3 was the second lowest quarter of the last eight in terms of deal volume. Deal value was down as well at $22.6B, which is significantly less than the previous two quarters.
The sector did not see any megadeals this quarter, representing a significant change from Q1 and Q2 2018 which saw megadeals totaling approximately $11B and $82B in deal value, respectively.
The deal volume of Q3 2018 has returned to the deal volume levels of Q4 2016 and Q1 2017.