M&A Activity heats up in Healthcare sector as national vaccine rollout begins

Australia’s Healthcare industry has fared better than other sectors and looks set to attract renewed interest from investors as the rollout of the COVID-19 vaccine helps to strengthen economic recovery.

Whilst it is still not quite business as usual, we are starting to see greater interest and increase in capital flows from investors and buyers into the Australasian Healthcare sector.

After navigating the early stages of the COVID-19 outbreak and with the start of the distribution of the vaccine, we expect to see an uptick in deal flow as companies focus less on capital preservation and start seeking new opportunities for growth.

There are 40 potential deals within the healthcare space, which is up from 37 deals in the previous quarter.

A potential growth area that the pandemic has accelerated is digital healthcare and telehealth. With lockdowns and business closures, the need for technological innovation within healthcare has become abundantly clear, from remote diagnosis and treatments to patients at home with devices able to accurately monitor their health data, we are likely to see the value of telehealth companies soar in coming years.

We are also likely to see a more diverse range of buyers enter the healthcare space through inorganic acquisitions, from traditional technology companies who can provide solutions in telehealth / health-tech, to large conglomerates diversifying their business and portfolios.

Private equity remains one of the most eager to pour funds into healthcare. In 2020, private equity players made up 24% of disclosed deals which is up from 14% in 2019.

Other insights in the report include:

  • Healthcare facilities boasted the highest deal volume for 2020 with 27 deals completed. A combination of significant regulatory changes, technological innovations and market dynamics look to be setting the stage for a period of rapid consolidation among healthcare facilities especially within aged care following the Royal Commission, which is expecting to hand down its final report in late February.
  • another key area for activity was Healthcare services with notable activity in diagnostics. This sector has seen increased demand in 2020 as the COVID-19 pandemic gathered force to the point where testing demand was a struggle to meet. Even in a post COVID-19 world, M&A in the sector will remain active, supported by favourable characteristics such as a growing geriatric population, growing prevalence of chronic diseases and a highly fragmented market.
  • The sector showing the most active signs for future deal activity is the Australasian Technology, Media and Telecommunications sector with more than 90 deals in the pipeline.

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The BDO M&A Heat Map is in partnership with MergerMarket, a global M&A deal intelligence platform. Information is based on “companies for sale” tracked by Mergermarket in the respective regions between 1 April 2020 and 30 September 2020.