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Healthcare Dominates Covid-Era M&A Activity​

By Jonathan Vu (UC Berkeley) and Roshan Setlur (Columbia University).

Trend Summary 

There’s no doubt that COVID-19 harmed global M&A activity, with the number of M&A transactions in Q2 falling nearly 30% when compared to 2019. However, the healthcare industry has dominated M&A activity during COVID-19, which has been defined as the period between March 11, 2020, to the present. Healthcare M&A activity in 2020 has only decreased by 20% compared to 2019 YTD, with deal volumes in biotech, pharma, and medical devices at similar levels in Q1 and Q2 compared to 2019. Moreover, some of the largest deals of 2020 have come from the healthcare sector, with Teladoc’s $18.5 billion acquisition of Livongo and Siemens’s $16.4 billion acquisition of Varian being the most significant ones. 

What is most striking about this trend is that in the age of COVID-19, when so many executives across the business world saw their M&A deals disintegrate at the drop of a dime, activity in the healthcare industry is booming more than ever. In fact, and rather serendipitously, several healthcare-oriented deals that weren’t otherwise slated to take place were accelerated by the looming pandemic. A closer look at any one of the deals that closed in the second or third quarter of this year or that are projected to close in the near future point to this trend, but a look at the aggregate numbers is perhaps most revelatory. For reference, healthcare-related systems saw 14 transactions during the second quarter of 2020. This number certainly marked a decrease from the previous quarter in which 29 transactions were announced. However, a look at the year-over-year numbers suggest a steadiness unsullied by the hand of COVID; there were 19 merger and acquisition transactions during the second quarter of 2019.

Graph: Global Volumes of M&A Transactions (Capital IQ)

Graph: M&A Transaction by Sector (Capital IQ)

Graph: Global Pharmaceuticals & Life Sciences Deal Volumes and Values (PWC)

Trend Overview 

The healthcare industry isn’t insulated from the economic effects of COVID-19, with the industry pivoting their focus towards the care of critical and COVID patients. With this shift, in addition to the effects on many of these companies’ bottom lines, other vital activities have been put on hold, such as clinical trials for non-COVID related products and elective procedures. Nonetheless, healthcare has been dominating M&A activity in this COVID era due to the continued growth in this inelastic industry and strategy changes by leadership.

First, continued growth in healthcare spending is helping to maintain M&A activity during COVID-19. As reported by Deloitte, the healthcare industry has an expected compound annual growth rate of 5% through 2023. There are several contributing factors to this continued growth. The most obvious factor is the world population is expected to reach 8.5 billion people by 2030, combined with longer life expectancies, will continue to drive growth in both B2B and B2C sales in healthcare. Furthermore, Asia and the Middle East/Africa are estimated to have accelerated spending growth at 7.1 and 7.4 percent respectively. This continued growth in an inelastic industry, despite significant economic downturns, means that major players still have a continued need to use M&A as their primary tool to address weak points and growth opportunities. 

Teladoc’s acquisition of Livongo shows how healthcare companies have used M&As to address major growth opportunities during the pandemic. Routine visits and other appointments have moved to virtual platforms in order to limit the spread of COVID-19; this trend is expected to continue as more and more patients are now reluctant to enter hospitals and prefer virtual visits over normal ones. This sustained growth in virtual visits seems to be a main driver behind Teladoc’s recent $19 billion acquisition of Livongo. As Livongo provides remote monitoring for 400,000 patients with chronic conditions, the acquisition will allow Teladoc to build a more complete portfolio of products. By adding remote monitoring to Teladoc’s already existing services, the company will be in a unique position to gain market share since expanded product portfolio gives an advantage over competitors with a limited scope of virtual services. 

Secondly, healthcare has dominated M&A activity because of strategy changes by C-suites in response to COVID-19’s economic repercussions. There’s no doubt that COVID-19 has caused significant economic turmoil, with the United States alone suffering a nearly 33% drop in GDP in Q2. With hospitals needing to take care of both critical and COVID patients, hospitals have been required to put other activities on hold to guarantee staff and patient safety. Some of these activities include clinical trials for a variety of new products, elective procedures, and non primary care visits. While there has been a pivot towards telemedicine, COVID-19 has greatly affected the bottom line of the healthcare industry. 

These effects of COVID-19 have caused leadership to reevaluate their short and long term strategy, according to consultancy EY. In a survey, 60% of respondents in the healthcare plan on pursuing M&A in the next 12 months, and 77% of respondents plan to continuously rebalance their portfolios. M&A is being used by healthcare as the means to achieve rebalancing as well as a way to reinvigorate growth post-COVID. In particular, as seen by similar deal volumes in 2020 and 2019, the sub-sectors of medical devices, life science, and pharma have continued to bolster their product pipelines during COVID, which will help them achieve long-term growth. 

The recent acquisition of Varian Medical by Siemens perfectly demonstrates how healthcare companies are using M&A during COVID-19 to stimulate growth. Varian Medical has a product portfolio that focuses on oncology, encompassing both software that helps with treatment planning and treatment delivery hardware. By consolidating Varian’s technology and treatment planning with its already existing imaging products into one portfolio, Siemens will revitalize its oncology portfolio, with the oncology market expected to reach $200 billion in spending by 2022.

Trend Drivers 

In terms of drivers, COVID, and the implications it’s had for the healthcare industry at-large are the defining ones. Many experts see COVID as a catalyst, especially in the long term for healthcare management and acquisition activity. Broadly, Covid’s impact points to the overwhelmingly positive attributes for larger systems. These attributes include a large base of human capital for dealing with the pandemic, a versatile range of resources, and intellectual capital. Besides, greater access to cash and capital acts as a much-needed shock absorber, in light of the unpredictability brought on by the pandemic. Needless to say, all of these are the natural results of consolidated healthcare systems.

"Covid-19 has demonstrated the advantages of scale, coordination, and innovation that are likely to strengthen the strategic rationale for future partnerships"
Kaufman Hall 

Significant Acquisitions 

Announcement Date 05 August 2020

Acquirer: Teladoc Health Inc.

Target: Livongo Health

Acquirer Advisors: Lazard Frères & Co.

Target Advisors: Morgan Stanley & Co.

Value: $18.5 Billion

Cash or Stock: Cash and Stock


  • Extended healthcare coverage for telemedicine, so that patients could continue to receive primary care and monitor other health issues during Covid, has fostered tremendous growth in this specific subsector

  • Telemedicine will continue to see sustained growth in the Post-Covid era due to hesitations to enter a hospital setting, motivating Teladoc to position themselves competitively

  • The acquisition of Livongo allows Teladoc to expand into chronic condition monitoring, since Livongo already provides remote monitoring for 400,000 patients with chronic conditions

  • By consolidating services, Teladoc is in a position to gain market share by having a more rounded product portfolio when compared to other virtual health providers

Announcement Date: 2 August 2020

Acquirer: Siemens Healthineers

Target: Varian Medical Systems Inc

Acquirer Advisors: JPMorgan Chase & Co and UBS 

Target Advisors: Goldman Sachs & Co. LLC

Value: $16.4 billion

Cash or Stock: Cash


  • Consolidates complementary portfolios aimed at fighting against cancer

  • Specifically, strengthens Siemens’ key product groups such as imaging and diagnostics through the implementation of “EnVision”, the combination of Varian’s treatment planning and technology with Siemens’ imaging presence.

  • Integrates “End-to-End” oncology solutions that run the gamut of cancer-related patient care

  • Harnesses “real-world evidence” and Artificial Intelligence to revolutionize cancer care with forward-looking technology 

  • Varian Shareholders will $177.50 per Share in Cash, in other words, a 42% Premium

Announcement Date 15 July 2020

Acquirer: Medtronic

Target: Medicrea

Acquirer Advisors: Bank of America and Société Générale 

Target Advisors: Cowen

Cash or Stock: Cash


  • Medicrea received FDA clearance for UNiD® IB3D Patient-Matched interbody cages in February, which allows doctors to match spine implants to each individual’s anatomy

  • This acquisition allows to Medtronic to further its spine surgery product pipeline

  • Furthermore, with Medicrea already getting FDA clearance means that acquisition will help to boost Medtronic’s sales in the near future

Announcement Date: 11 June 2020

Acquirer: Novo Nordisk

Target: Corvidia Therapeutics

Acquirer Advisors: J.P Morgan Securities

Value: $725 million for outstanding shares, $2.1 Billion upon achievement of regulatory and sales goals

Cash or Stock: Cash


  • Corvida’s main product, ziltikevimab, is an antibody that reduces heart disease in patients with a pre-existing chronic kidney condition, currently undergoing a phase 2B trials

  • This acquisition helps Novo Nordisk expand its product pipeline beyond diabetes and obesity drugs, into this specific niche of cardiometabolic diseases. 

Announcement Date: 2 August 2020

Acquirer: Gilead Sciences 

Target: Tizona Therapeutics

Acquirer Advisors: Cowen Inc

Target Advisors: Squire Patton Boggs

Value: $300 million for 49.9 percent equity interest


  • After this deal, Gilead has the right to acquire the remainder of Tizona for up to $1.25 Billion in “future milestone payments”

  • In terms of synergies, Gilead’s large research and development funding will accelerate Tizona’s “first-in-class” pipeline


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