Sixty percent of healthcare and life sciences investors are planning to increase their mergers and acquisitions activity in 2023 despite economic pressures, and a fourth of respondents to a recent survey expect to do at least 10% more deals than in 2023 compared with 2022.
That’s according to findings from the 2023 KPMG Healthcare and Life Sciences Investment Outlook.
“2022 is a story of both tailwinds and headwinds,” KPMG National Sector Leader Healthcare and Life Sciences Ash Shehata stated.
The results of the survey show a pent-up demand for portfolio shaping, consolidation and strategic partnershipI that could lead to a resurgence of M&A in 2023, KPMG said.
Long-term care tends to be a relatively resilient sector, which could make it more appealing to investors during the recession, according to the authors. Although capital costs have risen, the experts expect healthcare and life sciences M&A deal activity in 2023 to be roughly in line with pre-pandemic volumes, likely with more action in the middle market, which KPMG defines as companies with $200 million to $1 billion in enterprise value.
Private equity will be the major driver of M&A activity in the year year, according to the survey results.
Although M&A deal volume declined in long-term care in 2022, some deals were among the largest ever in this sector, the experts noted. Transactions worth more than $500 million included the Baltimore-based nonprofit Jack and Nancy Dwyer Workforce Development Center’s $590 million acquisition of 50 skilled nursing facilities in Texas and DTRT Health Acquisition Corp.’s acquisition of Consumer Direct Holdings, a national in-home care provider.
If the stock market strengthens in the year ahead, conditions could be favorable for companies looking to launch initial public offerings while valuations look promising, according to KPMG.
“Companies are sitting on a lot of cash and assessing their opportunities to make strategic investments now that will set them up to gain a competitive advantage as we come out of a possible downturn,” added Kristin Pothier, principal, national and global healthcare and life sciences deal advisory and strategy leader. “Whether investing in new technology platforms, enhancing their digital ecosystem or reimagining approaches to new geographies, deals are likely to continue to reflect the new reality of the industry, a reality that balances scientific and clinical advancement with cost.”
