Healthcare & Life Sciences
The Health and life science industry is a broad industry which includes multiple areas of upstream and downstream sub-industries in the healthcare sector. Healthcare service businesses including hospitals, clinics primary care services and therapists fall under this umbrella. In addition, manufacturers and distributors who supply equipment and components to healthcare service providers are all categorized under the industry. Key suppliers in this industry include pharmaceutical companies and drug stores, janitorial and sanitation services, industrial laundry and linen supply, medical instrument, device, and supplies wholesalers and medical schools. Upstream medical device manufacturers rely on machine shops, packaging services, and materials manufacturers as suppliers.
In Canada, due to public administration and healthcare infrastructure, end customers include patients as well as insurance companies and public administration authorities. The industry is currently in its growth stage. It is characterized by rapid technological change and high R&D spending. Health Canada regulations and patent laws play a key role in industry development, especially for pharmaceutical companies and medical practices. Medical suppliers face relatively lighter regulation. The Canadian healthcare and life sciences industry has witnessed strong growth over the last five years due to increased health care spending, and an ageing demographic. There has been a rise in the rate of obesity, diabetes, cardiac disease and mental health issues in North America over the last 10 years. In addition, development in healthcare infrastructure and diagnostic techniques has generated tailwinds for the industry. This trend is anticipated to continue as more patients require access to healthcare and science makes more breakthroughs. Due to health care insurance and government aid, the industry is not sensitive to price or business cycles.
This industry is driven by general economic growth and healthcare regulations. More specifically, government healthcare spending, healthcare innovation, increasing consumer awareness and corporate profits directly impact the healthcare industry in Canada.
Recent Healthcare & Life Sciences Advisory Mandates
Selling a Healthcare & Life Sciences Company
The Healthcare & Life Sciences industry has seen an uptick in the average deal size over the last three years. The pandemic has exposed weakness in global healthcare capacity and attracted investments in this space. The sharp increase in global demand for high quality healthcare services, equipment and medical products is expected to permanently shift the demand curve for healthcare industry verticals. In addition, as investors increase their appetite for risk in a low yield environment, M&A activity in the healthcare space is expected to remain robust. As Canada’s leading private market M&A Advisory firm Beacon understands that selling a business is an important decision. A dedicated business owner not only seeks to extract maximum value from the sale of a business but also seeks to sell the business to a competent buyer who can continue the company’s legacy. Beacon has worked on over 100 valuation and M&A advisory mandates in the healthcare & life science sector, bringing extensive experience in deal negotiation to the table. Our experienced advisory team will assist your business in navigating the entire sell-side M&A process.
As an entrepreneur or business owner who is exploring a potential sale, it is important to understand some key factors specific to the healthcare & life sciences sector that might impact the likelihood of a potential sale. These are factors that determine business attractiveness for potential buyers and investors.
Research & Development – The most important expense for companies developing products in the healthcare & life sciences space is investment in research and product development. This process may involve research studies on focus groups, clinical trials, and other experiments. Developing a successful product can often take years and substantial investment in the form of sunk costs with no guarantee of future revenue. Consequently, companies in this industry are considered highly risky. A company that has a successful track record of bringing products to market or a record of successful clinical trials is an attractive target for investors with complimentary product portfolios.
Regulation – Manufacturers in this industry are highly regulated and must undergo strict regulatory approval processes which are long and expensive. Consequently, undergoing this process successfully can open an exclusive market for players in the industry with low threat due to competition. Companies that own intellectual property in the form of exclusive patents are highly desirable and can sell for a substantial premium.
Exclusive Contracts – Companies offering highly specialized products and services often rely on sole source suppliers that control distribution of specific raw materials required in the manufacturing process. For manufacturers, having control over the supply chain and building exclusive relationships can elevate barriers to entry and widen the economic moat of a healthcare company. For distributors alike, having exclusive contracts with specialized suppliers offers protection against competition.
Marketing & Brand Awareness – One of the largest cost drivers for healthcare & life sciences companies is the marketing expense. In addition to investment in R&D and regulatory approvals, players in this space must invest extensively in educating customers about their products and spreading brand awareness among the general public. The larger the addressable market for a company’s product portfolio, the higher the attractiveness of the company.
With 40 years of combined experience serving businesses within Toronto, Ontario, and abroad, the Beacon transaction team has extensive knowledge and experience successfully working for several automotive companies from a variety of industries. Whether it be a valuation or sale, our team can provide expertise and resources found only at larger corporations, paired with the personalized touch of our M&A Advisory team. Contact us today to get in touch with one of our advisors.