M&A deals in the pandemic year
The coronavirus pandemic led many to believe that 2020 would be a slow year for M&A activity in the biopharmaceutical industry. But, in fact, the year proved to be a very fruitful one. The number of M&A deals was the highest ever achieved, while the transaction value was lower than in previous years. However, if we take into account only full company acquisitions and exclude mega-mergers, 2020 was in line with the years before. In numbers, there were 121 corporate acquisitions worth some 67 billion U.S. dollars in 2020. Additionally, there was one mega-merger: AstraZeneca’s acquisition of Alexion for 39 billion U.S. dollars. As a comparison, there were two mega-mergers in 2019, each worth more than 60 billion U.S. dollars.What drives M&A activities?
In order to thrive, biopharmaceutical companies need revenue growth and a promising research and development (R&D) pipeline. For many companies, especially the large ones, this is no longer possible through organic growth. Therefore, many of them purchase growth by acquiring another company, including its potential revenues and product pipeline. For example, a company specialized in oncology might buy another company with the same core business to broaden its access to this specific market. But it could also diversify its portfolio by purchasing a company that specializes in another therapeutic area. In the past, the most successful M&As were between companies with different revenue streams, a mix of established products and new products. The current trend focuses more on new-growth opportunities provided by specialty biopharma companies. M&A deals can also include the acquisition of just a certain business (concentrated on a specific therapeutic area, e.g.) of another company.Bolt-on acquisitions have become essential
While mergers of industry giants are more prominent and groundbreaking, acquisitions of small and mid-sized companies – mostly biotech – are becoming more and more important. These smaller, super-innovative enterprises, which use the latest technologies and are funded mainly through venture capital and private equity, have the most promising projects in their R&D pipelines. Choosing not to invest their own money into R&D, large companies acquire such enterprises, bringing with it their pipelines, knowledge, technologies, and potential revenues. For instance, among the big pharma companies, there is great demand for small biotechs that specialize in cell and gene therapies. Acquisition numbers of this particular type jumped to a record high in 2020, while, as mentioned above, the values of the deals were lower than in previous years.
