Mergers and acquisition activity, across most sectors, has remained at suppressed levels in the aftermath of the COVID-19 situation. A good number of companies resorted to conserving capital amid concerns over the uncertainty triggered by the pandemic. Fast forward, things are looking up, and observers are optimistic of deal-making improving and could bounce back to pre-pandemic levels come 2021.
Building M&A Activities
An improving COVID-19 situation amid the vaccines is one of the factors expected to positively impact deal-making in 2021. In addition to the COVID-19 situation easing away, fundamentals could also play a role in fuelling mergers and acquisitions in 2021.
The pandemic has significantly taken a toll on valuation levels, with a good number of companies trading at highly discounted levels. Conversely, companies with solid balance sheets could use the opportunity to buy highly discounted assets.
Industry watchers are especially optimistic of deal-making returning to pre-pandemic levels in the BioPharma sector. Big pharmaceutical companies have balance sheets to pursue M&A that have the potential to strengthen their competitive edge in the industry. The companies would also use the opportunity to expand their footprint into other therapeutic areas.
Biopharmaceutical Mergers and Acquisition
In 2020, there were 242 Pharma and life sciences transactions, a 2.3% drop from 2019 levels. The cumulative value of M&A in the sector was also down by 61% to $141 billion. Looking ahead, PricewaterhouseCoopers expects 2021 to usher in M&A deals worth $250 billion to $275 billion. A good number of the deals could be worth more than $50 billion in size.
AstraZeneca has already confirmed plans to acquire Alexion in a $39 billion transaction. Eli Lily is another big Pharma that has announced plans to acquire Prevail Therapeutics for $1 billion, as it seeks to strengthen its operations in gene therapy. The deal comes just weeks after the company inked a $135 million gene therapy development pact with Precision Biosciences.
In addition to booming M&A activity in the biopharma sector, realignment in the cannabis sector is also gathering pace. Mergers and acquisitions are heating up in the cannabis sector, with more than $600 million worth of deals announced in recent days.
Kick-starting the frenzy of M&A deals in the cannabis sector is multi-state operator Columbia Care which has inked a definitive deal to acquire Greenleaf Medical for $240 million. With the acquisition, the company is poised to expand its footprint into the Mid Atlantic.
With operations in New York and Toronto, Ayr Strategies has also inked a $290 million all-stock deal to acquire Liberty Health Sciences. It has also inked a $101 million deal to acquire a licensed New Jersey medical marijuana operator with three dispensaries. In Canada, Aphria and Tilray have inked a deal that will result in their merger resulting in a giant international marijuana firm with a combined equity value of about $3.9 billion.
The acquisitions spree is the latest sign that capital is slowly loosening up as companies devise ways to exist and strengthen operations amid the COVID-19 pandemic. Likewise, we are at an inflection point whereby growth prospects and legitimacy of the cannabis industry is starting to materialize.