Political and economic uncertainty caused pharma M&A to slacken off in 2016, seeing deal values in the sector falling to $273.7bn from $392.4bn the previous year. While 2016 was far from catastrophic for pharma M&A it failed to reach the all-time highs achieved from the mega-deals in 2015, and the collapse of the $160bn mega-deal between Pfizer and Allergan was just one of the year’s setbacks for the sector.
Despite this, M&A forecasters predict that 2017 could be one of the biggest years yet for the sector, particularly when you look at previous pharma M&A trends: the last time the sector experienced such a decline was during the financial crisis in 2008, however the following year saw some of the industry’s largest mega-deals of all time, when Pfizer purchased Wyeth, Roche bought Genentech and Merck acquired Schering-Plough. With this in mind, deal analysts expect to see a significant upturn in pharma deal making as the year progresses.
M&A in the Trump era
Donald Trump’s presidency is expected to be positive for M&A and mega-mergers in particular. The new administration is expected to look more favourably on large deals than initially anticipated and relax corporate tax rates, suggesting the American-based pharma companies will be in a much better position to go out and pursue acquisitions.
As there remains uncertainty around whether Trump will introduce regulatory changes, it’s likely that companies will try and complete transactions before any such changes come into effect. According to Pfizer’s chief executive, Ian Read, many US pharma companies are delaying their deal decision making until the new US administration announces its plans for corporate taxes, stating that the “whole industry is on pause” at the moment.
Chinese M&A boom set to continue
2016 was a stellar year for Chinese M&A and this doesn’t seem likely to slow down in 2017. Chinese and other Asian companies are expected to try and gain a greater share in US and European markets. For Chinese companies such as Jiangsu Hengrui Medicine and Shanghai Henlius Biotech, cross-border partnerships are very much at the forefront of their growth strategies and we can expect to see an even greater deal of outbound M&A from Chinese pharma companies as the year progresses.
2017 is anticipated to be one of the most active years for deal making in the pharma sector. Large pharma companies have been cautious over the last year, but now these big businesses have their takeover targets in sight and deal commentators expect that we will see a price war among some acquisitions.
Stay tuned to our blog for industry M&A analysis and remember to get in touch with our experienced team with any questions you have about the M&A process and how Benchmark International can help you.