Consumer appeal is another increasingly important differentiator. Inflation is a factor in healthcare, as in so many industries. Here, the impact is greater consumer scrutiny of value for money, especially for those with high-deductible plans. Businesses that can attract and retain consumers while maintaining good business performance have a growing opportunity to pull ahead. Connecting with consumers in new geographic regions is also a theme worth watching. Despite current headwinds in Europe, there remains a sizable opportunity for healthcare companies to grow into new markets as access to care continues to improve around the world.
2023 Outlook - January 12, 2023
Driven by strong demographic tailwinds, the healthcare and life sciences industry combines fast-paced innovation with steadily growing demand, offering investors a wide array of opportunities. In this article, senior bankers from the Harris Williams Healthcare & Life Sciences Group discuss the top trends creating M&A opportunities in 2023, the subsectors attracting the most buyer interest, and the current state of M&A dynamics in the industry.
Which trends will be creating M&A opportunities in healthcare in 2023?
Healthcare businesses are focused on doing more with less labor, whether by leveraging technology differently or changing their business models. That creates opportunities for businesses to differentiate themselves through better productivity, as well as for service providers and technology companies that can help move the needle.
Businesses that can attract and retain consumers while maintaining good business performance have a growing opportunity to pull ahead.
Which subsectors are you most excited about?
Outsourced Pharma Services
We expect pharma services will continue to be very active. As healthcare evolves into more tailored therapeutics, there’s growth potential in developing and delivering the right drug or device to the right patient at the right time. At the same time, biopharmaceutical manufacturers are facing increasing pressures on their business models as the cost to develop, manufacture, and commercialize these tailored therapeutics is greater than traditional therapies. That creates opportunities in many parts of the biopharmaceutical value chain: research and development, regulatory and quality, commercialization, manufacturing, specialty pharmacy, packaging, and others.
Providers and Outsourced Provider Services
Physician services should also continue to attract investors, as will behavioral health, which has been an increasingly important area in the post-pandemic world. Our team is also watching post-acute care closely because it meets a growing need to provide care to aging baby boomers in lower-cost settings, including the home.
Medical Products and Devices
M&A activity in pockets of the medical device value chain will continue. As hospital admissions and elective surgery volumes stabilize in the current environment, we expect more robust top-line growth from the OEMs. This supports product development and engineering, as well as manufacturing and related services. While the key inputs in the medical device supply chain remain an area of investor focus, favorable price increases combined with innovative products entering the market support continued investment opportunities.
Outsourced Pharma Services
We expect pharma services will continue to be very active. As healthcare evolves into more tailored therapeutics, there’s growth potential in developing and delivering the right drug or device to the right patient at the right time. At the same time, biopharmaceutical manufacturers are facing increasing pressures on their business models as the cost to develop, manufacture, and commercialize these tailored therapeutics is greater than traditional therapies. That creates opportunities in many parts of the biopharmaceutical value chain: research and development, regulatory and quality, commercialization, manufacturing, specialty pharmacy, packaging, and others.
What is the outlook for M&A dynamics in healthcare?
There are many opportunities for value creation in healthcare: Buyers have capital to put to work and high-quality companies are available at attractive values. Those investors who can see past the volatility and uncertainty in the headlines have the potential to pull ahead, and healthcare has long been viewed as a recession-resilient sector.
Within the industry, companies with proven management teams will continue to be in especially strong demand. Buyers want to see that leadership can manage the company through a downturn and come out ahead.