Healthcare M&A in 2014 was characterized by seismic changes. More than 40 deals were announced or closed with a value over $1 billion, and 8 were valued over $10 billion. Here are some key factors that shaped the healthcare environment for mergers and acquisitions.
The tax inversion window is closing
Following the U.S. Treasury Department’s proposed new restrictions, in many cases tax inversion deals have lost their attractiveness. While Medtronic/Covidien is the biggest inversion ever, the window is closing. AbbVie, Pfizer, Salix Pharmaceuticals and others, all terminated tax inversion deals.
The U.S. emerges in better shape
By emphasizing fiscal stimulus and quantitative easing monetary policy, the U.S. has lowered unemployment, created lean manufacturing opportunities, and raised GDP rates. Major income disparity issues remain, and inflation-adjusted income levels are too low for many Americans. But even the Federal Reserve Board has signaled that the country is on a positive track.
Europe, by contrast, is in a precarious state due its disparate economies, and its decision to emphasize austerity over stimulus. With European consumer markets not in a growth mode and internal debt mounting, China’s export economy has also slowed down. However, tricky market conditions create opportunities for well-capitalized firms to prepare for conditions to improve. (See Bayer’s $680m purchase of Dihon Pharmaceutical Group, and Medtronic’s $816m acquisition of China Kanghui Holdings).
