Strong deal figures in Q2 down to pre-pandemic deals closing now - PitchBook

Medical testing

PitchBook Data has released its healthcare focused Q2 European M&A Report, showing European M&A totalled an impressive EUR563.6 billion in H1 2020, keeping pace with 2019 figures despite the pandemic.

PitchBook believes the continued strong deal value figures in the second quarter could be a result of pre-pandemic deals now closing and boosting figures, as the deals that closed in Q1 and Q2 were negotiated back in 2019 when there was "no pandemic in sight", and the economy was stabilised, according to Dominick Mondesir, EMEA private capital analyst at PitchBook Data, and one of the authors of the report. 

"It will be interesting to see how the data pans out in Q3 and Q4. M&A activity will likely see a slight fall in those quarters. If we look at previous recessions it takes around a year for financial sponsors and corporates to deploy capital at scale and that’s when lenders are willing to lend again. So we’re likely to see a slight decline moving into Q3,” explained Mondesir.

PitchBook’s data showed that the UK & Ireland region provided 38 percent of European deal value, largely as a consequence of Allergan’s mega-deal. The next best regions in Europe were France & Benelux with 17 percent and the DACH nations with 17.2 per cent.

“Through the first half of 2020, 41 per cent of healthcare deal count was sponsor-backed, it’s a trend that we’ve already predicted, but the data adds more weight to that,” said Mondesir.

He continued: “We anticipate that sponsors’ appetite for healthcare assets in particular and life science companies will increase as the trend towards investing in that space heightens, and as GPs further leverage operating partners with deep sector expertise in driving reformed value creation plans in light of the pandemic.”

In Mondesir’s view, the life science area is extremely fragmented, operationally inefficient and riddled with unmet patient needs. 

"Due in part to the pandemic, changing demographics and ageing populations living with chronic and lifestyle related diseases -combined with the amount of dry powder and the healthy fundraising environment we’ve seen in life science vehicles- there's ample room for consolidation in the space and we expect sponsors to really drive investment activity into the healthcare space in the coming quarters and into 2021," he commented.      

Six mega-deals (EUR 5 billion plus) closed in Q2 2020, which is the largest quantity in a single quarter since Q3 2017, emphasising the appetite to close deals despite uncertainty across most European regions.
“The secular trends in investing in what I like to call the five C’s: the cloud, cashless payments, cybersecurity, collaboration and e-commerce has led to significant M&A activity and will likely lead to more activity in coming quarters,” said Monier.