Medical devices and foodservice sectors see a massive rise in M&A activity in Q2 2021

07/29/2021

Like many other sectors, the coronavirus pandemic halted numerous mergers and acquisitions (M&A) in the second quarter of 2020. But, 2021 has presented outstanding results in this regard. The objective is to generate effective outcomes in medical devices, food service, and healthcare sectors.

Out of all these sectors, medical devices generated the most profitable Q2 2021 regarding deal values. Apart from that, the healthcare sector recorded the best growth in deal volume compared to the second half of 2020.

However, there are many more underlying facts that we need to go through. In this article, we will be presenting all of the developments regarding specific sectors and their conditions going forward. 

The Healthcare sector saw massive growth in Q2 2021

In Q2 2020, the M&A transaction value sank to its lowest evaluation since 2016, i.e., $364bn. But, things improved after the coronavirus pandemic. After June 2020, the M&A transaction value jumped to $1tn, three times its value in Q2 2020. 

If we talk about the sector level, the medical devices saw a sharp increase in deal values in Q2 2021 compared to Q2 2020. The foodservice and pharma sectors are not that far behind either, with 586% and 458% registered growth, respectively. However, considering the deal volume, the healthcare sector registered the most significant rise of 70% compared to Q2 2020. 

Key Findings

In Q2 2021, we saw further developments in the healthcare industry sector. In comparison to the healthcare sector, the others saw a decline in gains. The healthcare sector is associated with the Acute Care sector. This sector has overseen a sharp increase of 106% gains in the past 36 months. This evaluation is almost twice the evaluation of the S&P 500.  

The Homecare and Medical Equipments sectors have also produced significant results as they recorded benefits of 74% and 61% respectively since 2018. The improvement recorded in these sectors is largely down to a massive increase in the US population and the disease ubiquity.  

Q2 2021 also reported a significantly lower transactional value as compared to Q2 2020. However, we saw a sharp rise in the deal values during the same duration. M&A activity looks incredibly strong in the healthcare sector as it recorded the second-most transactional volume over the last 12 months. The MedTech category was responsible for making the transactional procedures work. It holds 20% of the overall healthcare sector. 

The Healthcare and Biotechnology sectors saw the most significant Q2 2021 as they recorded 19% and 17% transactional volumes, respectively. Even though the recovery phase has varied among different countries and sectors due to the coronavirus pandemic, the US deal volume is stable from last year. 

Furthermore, we can expect to see the 2021 deal volume leapfrog the 2020 deal volume. Numerous economic indicators predict that the increase in deal volume could reach a double-figure percentage. Meanwhile, the value of the deal volume in May has already exceeded the overall deal volume in 2020, making things stable.

Coronavirus pandemic increased the use of technology

The tech, media, and telecom (TMT) sectors are significantly associated with M&A deals. In the second half of 2021, we saw the completion of 2,876 contracts with a revenue of $357bn. The innovative technological advancements have had a considerable role to play in this regard. 

Furthermore, the rules and regulations of social distancing and lockdowns made all the other sectors integrate technology into their working plans via mergers and acquisition deals. This use of technology will enable them to overcome the challenges in the COVID-19 pandemic. 

The healthcare sector was severely affected until the surge of the coronavirus pandemic. But, technological advancements have steadied the damage. Moreover, there is an encouragement of deal activities in this sector. The government authorities confirmed the digitalization of healthcare systems. They incorporated medical devices, medical management software, and digital remedies. 

How did technology impact other sectors?

By looking at the developments in the healthcare sector, numerous other companies considered changing their business models via technology. On the other hand, the foodservice sector is not lagging far behind either. They have tried to associate themselves with eCommerce to be in touch with the innovative world. 

The other businesses have realized that they cannot just rely on old-school tactics anymore to remain significant in the modern world. They have to evolve to compete with the rest of the industries continuously. Technology is a valuable option to make them do just that. 

Further use of technology

The use of technological advancements has become even more common in 2021. Technology is now considered to be the core for most sectors around the world. In Q2 2021, we have seen the healthcare sector associate itself with the most tech companies. There is an argument that the COVID-19 self-isolation rules and regulations have had a considerable role to play in this development. Regardless of that, technology is here to stay and envelop in numerous sectors around the world.

We also saw the inauguration of public trading companies within numerous sectors. For example, the medical equipment and homecare sectors had the most significant public trading companies associated with themselves. This association generated considerable revenue within these sectors, which helped the country’s economy.

Drivers of M&A in encouraging positions 

Sectors like telehealth, personal health, and virtual are in increased demand as numerous healthcare providers consider offering more productive care. 

Furthermore, there are developments seen in the urgent care systems. We have seen medical professionals hire beginners in their field and made them part of their working plans to increase productivity. There are numerous medical working panels made in this regard, which may only increase going forward.

With an increased demand for care systems, there was also an increased demand for medical experts. The professionals had realized that they could not rely on themselves only to increase productivity. Therefore, they decided to hire professionals/beginners and integrated them into their panels. 

Apart from the vaccination initiatives, quick and advanced handover diagnostics have also played in the coronavirus pandemic. Among all the aspects of medical devices, in-depth diagnostics, diagnostic photography, and orthodontist devices were the three sectors to project the highest deal values.

The healthcare sector reported the most significant deal volume in the first quarter of 2021. The top pharma experts hold talks with biotech organizations regarding cell and gene therapy alongside the healthcare sector. They want assurance that all the plans are set to evolve in the new world of realities. 

If we talk about the foodservice sector, we saw a trend of bigger businesses associating themselves with the famous and technological niche brands this year. Snacks and homemade food were more popular as people had to sit at home because of the lockdowns in the COVID-19 pandemic. Due to the lockdowns, there was a subsequent increase in deals for the manufacturers of those food products. 

As the vaccination programs continue to bring life back to normal, we have also seen positive trends regarding restaurant businesses. For example, the restaurant business recorded a growth of 40% in M&A deal value in the first quarter of 2021 compared to the previous year. 

Huge deals in Q2 2021

In the second quarter of 2021, we saw the announcements of a total of 12 megadeals regarding the healthcare, pharma, and medical devices sectors, respectively. In the top deals, the most notable ones were the accession of Purified Protein Derivative (PPD) by Thermo Fisher for $21bn. Furthermore, we also saw the acquisition of Aldevron by Danaher for $9.5bn. 

The Middleby Corporation attracted the most prominent headlines as it planned to purchase Welbilt for $4.3bn. It was the foodservice sector's most significant deal reported so far. However, its evaluations were still far behind the medical devices and pharma sectors. Therefore, we may expect further developments in the foodservice sector going forward. 

In 2021 and beyond, the coronavirus doesn’t seem to go away and is a massive concern for the overall wellbeing. However, the demand for various food products such as vitamins and minerals will increase further. This increase in demand will bring appropriate deals for the attraction of investors around the world. 

Conclusion

The surge of the coronavirus pandemic has negatively impacted numerous industries around the world. People are striving to hold onto their jobs and the maintenance of productivity in their respective industries. But, we have seen massive growth in medical devices, healthcare, and food service. 

We have seen record-breaking improvement in Q2 2021 regarding deal volume. Alongside that, the healthcare sector showed a vast growth rate in comparison to Q2 2020. As we are now hearing about rumors of a fourth coronavirus wave hitting the world, we can expect further developments regarding this in the future.

The coronavirus pandemic doesn't look like going anywhere. The reason is that the pandemic has had a massive influence on the deal volumes of the US in Q2 2021. Will the current trend continue, or may we see a decline at some point?