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Healthcare M&As set to increase in Australia
Australia is an increasingly attractive destination for mergers and acquisitions in the health care sector, a new report says.
Grace Ormsby
MinterEllison’s M&A Outlook: Australian Healthcare 2018 report identifies Australia’s position in an increasingly strong global health M&A landscape.
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The report highlights nearly $48 billion worth of M&A transactions in Australia occurring over the last decade.
It also said Australia has represented 27 per cent of all Asia-Pacific healthcare M&A from 1 January 2017, “running second only to China at 38 per cent”.
This is framed within a record US$306 billion worth of deals taking place globally in the first six months of 2018, which has been linked to “growth by acquisition strategies”, according to the report.
For Australia, target firms for M&A over the last ten years have mainly been in the pharmaceuticals, healthcare facilities and service subsectors, accounting for $41 billion of the Australian deals presented. The report goes on to say “the average deal size is higher in these sub-sectors than others, with the average size of facilities transactions (A$57.1 million) and pharmaceuticals (A$44.2 million) around double the average value in most of the other sub-sectors.”
The report notes Australian acquirers have overwhelmingly participated in Australian healthcare M&A transactions, and, “unsurprisingly, healthcare firms are the dominant acquirers, with A$21 billion in assets bought in 786 transactions.”
“However, the average size of assets acquired by Australian firms (A$27) million is significantly less than the average size of Australian assets bought.”
The report points out that Australian financial organisations “have acquired around one third of all healthcare industry assets where there has been an Australian acquirer over this period. Most of these transactions have been completed by private equity funds.”
Off the back of such high activity despite a “challenging set of conditions”, MinterEllison partner and National Health Industry Group leader Shane Evans said they “expect that the next 18 months should see robust M&A activity in global healthcare.”
“Signals show that healthcare’s deal boom is set to continue, with cashed up buyers chasing an increasingly narrow pool of assets that combine quality businesses with growth potential," he continued.
The report identifies a number of global healthcare M&A drivers and challenges – including meeting the demand of an ageing population; increasing regulation and compliance costs; and spin-offs by larger conglomerate companies to get ‘back to basics’ making it “not surprising to see why many players are now pursuing growth by acquisition strategies.”
