SUGGESTS M&A ACTIVITY TO THRIVE AS COMPANIES PURSUE VALUE
- Deal activity in the Emirates pivots from Provider consolidation to acquisition of strategic assets
- Investment funds show appetite; focus on HealthTech/MedTech assets post Covid-19
- Local Pharma and BioTech considered prized assets for home-grown production and reduce reliance on imports
Dubai: Leading global professional services firm Alvarez & Marsal’s (A&M) latest edition of the UAE Health Sector Pulse indicates a shift from Provider consolidation to the acquisition of strategic assets as companies re-evaluate their corporate strategy and exercise healthcare sector investing ‘caution.’ As investors in the UAE reassess their place in the value chain and how acquisitions can improve those positions, having a value-creation strategy will be critical.
Between 2016 and 2021, 81 percent of deals were driven by Provider acquisitions or mergers, however post COVID-19, there has been an increase in HealthTech/MedTech and Pharma deals. Deal activity in the first half (H1) of 2021 was propelled by investment funds accounting for 58 percent of the transactions, versus 41 percent between 2016 and 2020.
As a result of COVID-19 disruption, more investment funds have been active in the healthcare space, attracted to the sector’s resilient earnings and long-term growth trajectory. The report shows that private equity (PE) accounted for 50 percent of investments in HealthTech/MedTech companies, as investor interest increased, enabling deal flow to recover in 2021. PE firms’ investment in HealthTech is rising, as evidenced by the increasing share of late-stage investment.
Healthcare M&A saw strong growth over the first half of 2021 as investors continued to pursue deal opportunities in a sector that has played a crucial role in managing the pandemic. Healthcare continues to attract new investors seeking local investment opportunities and portfolio diversification. Local Pharma and BioTech assets represent a significant opportunity as they support the localization of production and reduce reliance on imports. Additionally, they also signal a growth opportunity for the local economy and along with building export capabilities.
Karim Benhameurlaine, Managing Director and Head of Healthcare and Life Sciences Middle East with Alvarez & Marsal’s Performance Improvement, and Dr. Sara Alom Ruiz, Senior Director Healthcare and Life Sciences Middle East with Alvarez & Marsal Performance Improvement group in Dubai, co-authored the report. The M&A edition of the UAE Health Sector Pulse details the types of assets being acquired and the types of investors active in the market. Moreover, the report reviews clinical, operational, and financial trends.
Mr. Benhameurlaine commented: “In the UAE, healthcare providers have typically focused on consolidation with the objective of capturing additional market share across multiple clinical specialties and catchment areas. This has led to sector oversupply concerns alongside the need for organizations to think differently about strategy, sustainability, and growth, as prompted by the pandemic. Investors should target subspecialty niche providers, to complement existing care continuums, for maximizing value and diversifying offerings through new capabilities and services.”
The report identifies the following areas to be “M&A hotspots” in the UAE healthcare sector in the short to medium term.
- Providers will increasingly find value in adopting HealthTech software such as artificial intelligence (AI) / analytics / cloud solutions to address critical issues and to improve workforce efficiency and process optimization.
- As complex MedTech transitions from experimental to mainstream, providers will seek to integrate these products to optimize patient care and differentiate themselves. Leading facilities will likely build their value proposition around a combination of high-quality physicians and robust MedTech support to improve outcomes.
- Despite increased adoption during the COVID-19 pandemic, telehealth remains a minor part of most healthcare offerings. Providers will seek to selectively identify areas to deploy telehealth to bolster existing capabilities.
- Key stakeholders will likely continue standardization efforts with the objective of reimbursing value-based care.
Dr. Alom commented: “Healthcare M&A in 2021 is characterized by more strategic deals with steady growth in tech-enabled healthcare. Deal flow recovered in H1 2021 as healthcare groups sought to diversify business models by pursuing stakes in cloud-based services, virtual care and post-acute services. We anticipate investment funds will continue to take strong HealthTech asset positions with demonstrated commercials. Our outlook for deals in the UAE remains positive as the sector’s fundamentals remain strong.”
Note: All the data used in this report has been obtained from publicly available sources as well as private, M&A-focused databases.
About Alvarez & Marsal:
Companies, investors and government entities around the world turn to Alvarez & Marsal (A&M) for leadership, action and results. Privately held since its founding in 1983, A&M is a leading global professional services firm that provides advisory, business performance improvement and turnaround management services. When conventional approaches are not enough to create transformation and drive change, clients seek our deep expertise and ability to deliver practical solutions to their unique problems.
With over 5,500 people across four continents, we deliver tangible results for corporates, boards, private equity firms, law firms and government agencies facing complex challenges. Our senior leaders, and their teams, leverage A&M’s restructuring heritage to help companies act decisively, catapult growth and accelerate results. We are experienced operators, world-class consultants, former regulators and industry authorities with a shared commitment to telling clients what’s really needed for turning change into a strategic business asset, managing risk and unlocking value at every stage of growth.