After a slight dip in 2024, mergers and acquisitions (M&A) activity in the life sciences sector is expected to rebound strongly in 2025. Several factors, including pent-up demand, the state of company pipelines, and improving economic conditions, point towards a resurgence in dealmaking.
What Happened in 2024?
M&A activity in the life sciences sector experienced a decline of roughly 24% in 2024, returning to 2022 levels. This decrease reflected a cautious approach by many companies navigating a challenging economic and geopolitical landscape. However, this slowdown appears to be a temporary pause rather than a long-term trend.
Key Drivers for a 2025 Upswing
- Pent-Up Demand: Both life science companies and private equity firms are sitting on significant amounts of "dry powder," capital reserved for investment. This suggests a strong appetite for deals.
- Pipeline Pressures: Many companies face looming losses of exclusivity (LOE) on key assets by 2027, potentially leading to a material decline in revenues if they don't act.
- Performance Gaps: A widening gap exists between top-performing and underperforming companies in the sector. M&A can be a strategic tool for companies looking to close this gap and enhance their competitive position.
Where is the Activity Concentrated?
In 2024, the Americas accounted for the largest share of life science deal value at 69%, followed by Europe, the Middle East, and Africa (EMEA) at 17%, and Asia-Pacific at 14%. Biotech and pharmaceutical companies continue to be the primary drivers of M&A activity, representing 44% and 28% of industry deal volume, respectively. Private equity (PE) activity also increased, accounting for 15% of deal volume.
Strategic Priorities in the Current Market
Life science companies are taking proactive steps to prepare for the expected M&A upswing. This includes:
- Reassessing competitive advantages: Companies are carefully evaluating their strengths and weaknesses to identify areas where M&A can bolster their strategies.
- Addressing Life Cycle Compression: Leading players are utilizing advanced analytics to proactively manage the challenges posed by increasingly shorter product life cycles.
- Building Financial and Operational Capabilities: Companies are strengthening their ability to finance, structure, execute, and integrate M&A transactions effectively.
Subsector activity
Biopharma: With growth-focused acquisitions accounting for 80% of deals between 2020 and 2024, the urgency to replenish pipelines remains a key incentive for dealmaking.
Medtech: Medtech companies experienced the industry’s most active year for portfolio-shaping activity since 2017
Life-science-service: Companies in this sector are looking to acquire complementary offerings to provide more integrated, end-to-end solutions to their clients and to cover all stages of the product life cycle.
Final Thoughts
While 2024 presented its challenges, the life sciences sector appears poised for a rebound in M&A activity in 2025. Companies that proactively prepare, develop robust M&A capabilities, and remain strategically focused will be best positioned to capitalize on the opportunities that lie ahead.
Source: Dealogic; McKinsey analysis
