February 14, 2023 | M&A
Mergers and acquisitions (M&A) in the pharmaceutical industry enable companies to expand their operations, increase their market share, and gain access to new technologies and products. It also helps companies to become more efficient by eliminating redundant processes and by streamlining operations.
Rapid advancements in drug discoveries and formulations have led to the pharmaceutical industry being highly competitive, with medical M&A gaining popularity as a useful tool to gain competitive advantage. Merging with or acquiring a competitor gives access to new markets, customers, products, and access to new technology and intellectual property.
Medical M&A activity in the pharmaceutical industry has been steadily increasing since the beginning of the past decade, and more so since the start of global pandemic. M&A activity in the pharmaceutical include key trends such as continued consolidation of the industry and the emergence of new technology-driven companies.
The consolidation is mostly driven by the need for larger, more efficient companies to respond to new challenges and opportunities. M&As are not just limited to large companies, there’s always a race to acquire smaller companies to gain access to their intellectual property and talent.
Another trend in the medical M&A sector is the increasing focus on specialized therapeutics that can effectively address unmet needs or fill gaps in the product portfolio. Pharma majors also tend to acquire companies with expertise in areas such as genomics, diagnostics and digital health.
The United States and Europe are two of the hottest spots for medical M&A activity. Being a popular destination for medical M&A due to its large, mature market, access to innovative products and technologies, and the presence of large pharmaceutical companies, the U.S. accounts for a major share of global medical M&A activity.
The European market is also attractive due to its large, mature market, access to innovative products and technologies, and the presence of large pharmaceutical companies. Companies are also looking to acquire companies in emerging markets in Europe.
Asia is also becoming a hot spot for medical M&A. The Asia market is attractive due to its large population, and global pharma giants look to acquire companies in emerging markets in Asia, such as India for their access to new markets and lower costs.
The Latin American market is also an attractive destination due to its large population. Brazil and Mexico are emerging markets in Latin America, and they are preferred for their access to new markets and lower costs.
Synergy capture is one of the most effective ways to create value in medical M&A. Synergy capture is the process of identifying and capturing the value of combining two or more companies. This can include cost savings, revenue growth, and access to new markets and products.
Companies can also look to identify and capture revenue growth opportunities through leveraging existing customer relationships, expanding into new markets, and launching new products and services.
Companies can also look to acquire or invest in companies with expertise in areas such as genomics, diagnostics and digital health to gain access to new products and technologies.
Despite the potential for value creation, medical M&A can be a risky endeavor. There are several challenges that companies must be aware of when considering medical M&A.
One of the biggest challenges in medical M&A is regulatory risk. Pharmaceutical companies are subject to a variety of regulations, both domestically and internationally, in order to ensure compliance. Companies must be aware of the regulatory implications of any proposed M&A transaction.
Companies must also be aware of financial risks in M&A. Companies must conduct due diligence to ensure that the financials of the target company are accurate and up to date. Companies must also be aware of the potential for hidden liabilities including environmental or legal liabilities.
Also Read: HOW TO CONDUCT SUPPLY CHAIN DUE DILIGENCE
Although often overlooked, investors must consider the cultural risks of medical M&A. Companies must be aware of the cultural differences between two companies in order to ensure a successful integration. The different corporate cultures must be taken into consideration to ensure that the two merging companies are able to work together effectively. In addition, investors must be aware of cultural differences between countries in order to ensure a successful cross-border transaction.
Medical M&A helps companies to reduce costs and improve efficiency and gain access to new technologies and processes, which can help them reduce their costs and become more efficient. Additionally, medical M&A can allow companies to cut down on redundant processes and personnel, which can reduce their overhead costs.
Additional Read: M&A ON THE RISE IN THE MEDICAL DEVICE CONTRACT MANUFACTURING MARKET