M&A activity in biopharma is rising significantly, both in the number of deals and in transaction volumes.
Here are six key reasons why boards are finding M&A deals attractive now:
- Renewed focus on growth. After years of cost-cutting and restructuring, many biopharma companies are looking to gain scale as their competitors and customers bulk up.
- Need to compensate for revenues from expiring patents. Many biopharma companies have portfolios that have lost patent exclusivity, and they are now making deals with a defined set of targets.
- Need to participate in ongoing segment consolidation. More companies are seeing the urgency of concentrating on what they do best and getting out of areas in which they are weak.
- High level of acquisition currency and comparatively cheap financing. Companies are taking advantage of their large cash reserves and rising stock prices to pursue takeovers.
- Valuation premium for high-growth companies. Even as valuations have soared, investors continue to be supportive of deals involving high-growth companies.
- Financial engineering. Some deals are being driven by the prospect of significant tax benefits that can be gained by moving headquarters to another country.