Ten year deal activity in pharmaceuticals industry stands at $2.4 trillion

06 March 2017 Consultancy.uk 7 min. read

The pharmaceutical industry has spent more than $2.4 trillion on mergers and acquisitions over the past ten years. Across the period the industry has been responsible for an average of 9% of total global M&A deal activity.

The mergers and acquisitions (M&A) market has, in recent years, strongly recovered from post crisis lows. According to data from Mergermarket, global M&A activity in 2016 amounts to total value of $3.2 trillion, spread across 17,000 deals. Last year was the third best year for mergers and acquisitions since 2007, despite political shock waves that have affected macroeconomic conditions and an 18% decline in the total value compared to 2015. The start of the financial crisis in 2008, following the bumper 2007 result ($ 3,7 billion), saw global M&A activity not exceed $2.5 trillion until 2014, with 2009 the low point when total value dropped to $ 1.7 trillion. 2015 was the best year over the past decade, when total M&A activity hit $3.96 trillion.

Size of the global M&A market

North America has remained the largest market for M&A activity during 2016, both in total value and number of deals. With total value of nearly $1.5 trillion spread over 4951 deals, the US and Canada together accounted for 47.5% of the global market. This was the second highest yearly result for the region’s M&A activity over the past decade; 2015 (5.298 deals; $1.9 billion in value) is the only year in which the result was exceeded.

Total M&A value globally by region

The European M&A market appears to have suffered from the political uncertainty caused by the UK EU referendum vote, among others. The European M&A market last year reached a value of $797.4 billion spread over 6756 deals – around a quarter of the worldwide market in terms of value. The result is down around 10% on 2015, when $888.7 billion was invested in a similar volume of deals. 2015 European M&A value was itself slightly lower (2.8%) than the 2014 result, at $914.3. The highest M&A value for Europe recorded for the decade occurred before the crisis; in 2007 the European market hit a record high of $ 1.5 trillion.

Value of M&A in the gloabl pharma industry - by region

The Asia Pacific market, meanwhile, has seen an increase in the total share M&A activity. The region (excl. Japan) last year accounted for 20.3% of the global value, at around $658.8 billion. The market has almost doubled, relative to the total in 2007 ($343.4 billion).

Pharmaceutical sector

One of the sectors that has stood out over the past years, largely due to the number of large and mega-deals, is the pharmaceutical, medical and biotechnology industries. As a result of the mega deals in the sector, the market share of the pharmaceutical industry over the past accounted for 8.75% of the total M&A market. Particularly 2009 and 2014 saw large contributions from the pharmaceutical sector worldwide to the global total, at 13.1% ($227.7 billion) and 11.7% ($379.9 billion) respectively.  

Value of M&A in the global pharma industry

In 2015, M&A deal activity in the pharmaceutical sector reached its highest value in the past ten years at $392.4 billion – or just under 10% of global M&A activity. Last year, the share value of deal activity for the segment decreased to $274 billion. The decrease was primarily due to a decline in value in the North American market - the US and Canada in 2015 accounted for nearly $300 billion, in 2016 the share of total deal value dropped by 41% to $ 177 billion. Nevertheless, in the top five largest deals in the US last year, the fifth spot went to a mega deal in the pharmaceutical sector - the acquisition of Baxalta by the Irish company Shire, the deal was valued at $35.2 billion.

Top ten deals of all time

In the European market, meanwhile, M&A activity related to the pharmaceutical industry saw total value grow 72%, from $33 billion to $57 billion. Whereby the pharmaceutical industry accounted for 7.1% of the European M&A market. In Japan, which has a relatively small pharmaceuticals market, total deal value more than doubled from 2015 to 2016, at $2.9 billion and $7.3 billion respectively. The large increase is explained by a mega deal in the Japanese pharmaceutical industry - Canon bought Toshiba Medical Systems Corporation from the Toshiba Corporation for $5.9 billion. The deal was the second largest closed in Japan’s wider M&A market.

The deal between Canon and Toshiba, however, is nothing compared to the largest pharmaceutical M&A of all time. Based on data from Bloomberg, the deal, which occurred in 1999, saw Pfizer acquired Warner Lambert for €84.3 billion. The US-based acquirer, and the largest pharmaceutical company in the world according to Forbes, is found twice more in the list of the top 10 largest pharmaceutical transactions, for the 2002 deal to acquire Pharmacia (# 3) and the 2009 acqusition for Wyeth (# 7) for €63,8 billion and €48.9 billion respectively. UK-based Glaxo Wellcome boasts the second largest deal in history, the in 2000 completed merger with SmithKline Beecham, with a total value of €71.7 billion. Today the merged company is the sixth largest pharmaceutical company in the world. Sanofi recorded the fourth largest deal, with the 2004 Sanofi-Aventis deal worth €58.6 billion.

The 10 largest transactions in the pharma industry

The top ten highlights that mega deal activity in the pharmaceutical world is not only a thing of the past, as evidenced by the deal # 5 on the list. The acquisition of American multinational biotechnology company Monsanto by the German pharmaceutical and chemical company Bayer for €58.2 billion, which took place last year. The deal, which took the second spot for US mega-deals in 2016, and was categorised among deals in the industrial and chemical sectors by Mergermarket. American pharmaceutical company Allergan is found twice on the top ten list, at #6 and # 10, both times as an acquisition target. In the first deal, the group was taken over by Actavis, but the name of Allergan was kept as part of the integration process.  In the second deal, a division of Allergan was acquired by Teva Pharmaceutical in 2015.

Abbvie, an offshoot of the US Abbott Laboratories, founded in 2011 by the pharmaceutical company, was disposed from the company. The sale of the subsidiary came in at €43.1 billion and thus stands in eighth place. Merck & Co., also one of the top five players in the global pharmaceutical landscape, takes ninth place with the acquisition of Schering-Plough in 2009.

Recently, the pharmaceutical industry has again saw mega deal activity. Earlier in January 2017 it was announced that Johnson & Johnson has made a successful takeover bid for the Swiss Actelion, valued at almost €28 billion. This deal, according to Bloomberg, places the company on the 13th spot for the largest M&A deals in the pharmaceutical sector history.