A frenzy of merger and acquisition activity could spell opportunity for health care stock investors – especially in data, biotech, pharma, and medical devices.
“The year 2021 went out with a bang for health care M&A action, with major tech companies getting in on the action," Curran wrote recently on Real Money. "But this year should see lots more buys ahead with hundreds of billions of dollars waiting to be spent, according to several experts,” said The Street’s Kevin Curran in Real Money.
Industry experts concur, with some noting it’s a good time for some M&A activity in health care.
"'Healthtech' is a natural target for more consolidation today on the basis that the space exhibits the classic advantages of scale, yet most companies are still-under scaled, such that larger players can bring the broader solution to fruition and achieve the natural scale advantages," Cody Powers, a partner and principal at management consulting firm ZS, told Real Money.
Examples abounded in 2021, which could set the pace for 2022.
“Over 2021, health records giant Cerner (CERN) - Get Cerner Corporation Report got snapped up by tech giant Oracle (ORCL) - Get Oracle Corporation Report for the hefty price of $28.3 billion,” Curran noted. “Microsoft (MSFT) - Get Microsoft Corporation Report made a $19.7 billion purchase of Nuance Communications, and Alphabet (GOOGL) - Get Alphabet Inc. Class A Report partnered with HCA Healthcare Partners (HCA) - Get HCA Healthcare Inc Report to help its digital transition in health care. Apple (AAPL) - Get Apple Inc. Report, meanwhile, is believed to be on the hunt for a health care takeover target of its own.”
Those events tee up 2022 for more M&A engagement.
"Overall, the activity in 2021 represented a more normal year of M&A investing and some level of deferred M&A from 2020," PwC's Deals Sector Leader John Potter explained in a recent report anticipating the year ahead. "In 2022, we expect M&A investments to reach $350 billion to $400 billion, driven by all subsectors," Potter wrote
Already in 2022, medical device firm ShockWave Medical (SWAV) - Get Shockwave Medical, Inc. Report is attracting interest from Penumbra Inc. (PEN) - Get Penumbra, Inc. Report, Bloomberg reported. Abbott (ABT) - Get Abbott Laboratories Report, Boston Scientific (BSX) - Get Boston Scientific Corporation Report, and Medtronic (MDT) - Get Medtronic Plc Report all are apparently eying the firm as well.
“Given the number of firms interested in a potential multi-billion-dollar deal, the expectation of more deals targeting the space is hardly a stretch,” Curran said.