• Strongest start ever for global healthcare M&A.
• Megadeals are gaining pace.
• Spin-offs by larger conglomerates are on the rise.
• The online technology giants are starting to position themselves in the sector and challenging incumbents.
• Australia is increasingly attractive.

MinterEllison's M&A Outlook: Australian Healthcare 2018 report has been launched, identifying key global healthcare M&A drivers, challenges and risks.

Formed through extensive analysis of healthcare global deal data, the report highlights that a record $US306 billion of deals (averaging 81% premiums paid) have been announced through the first half of calendar 2018.

"We expect that the next 18 months should see robust M&A activity in global healthcare," said Shane Evans, MinterEllison Partner and national Health Industry group leader. "Signals show that healthcare’s deal boom is set to continue, with cashed up buyers chasing an increasingly narrow pool of assets that combine quality businesses with growth potential."

The report identifies a number of global healthcare M&A drivers and challenges – including meeting the demand of an ageing population; increasing regulation and compliance costs; and spin-offs by larger conglomerate companies to get 'back to basics'.

"There's also an overall trend towards building scale in the fragmented industry, more cashed up PE funds making new inroads into healthcare, and Chinese investment focused on strategic assets, advanced technologies and the commercialisation of IP,” said Victoria Allen, MinterEllison's Deals Chair.

Technology giants are also identified as viewing healthcare as a fertile ground. These players will impact existing business models, supply chains and valuations of incumbent players - as was highlighted with Amazon's influential acquisition of US online pharmacy group PillPack for $US1 billion.

In this landscape, the report also highlights that Australia is increasingly attractive with nearly $A48 billion worth of M&A transactions over the last decade, and representing 27% of all Asia-Pacific healthcare M&A since 1 January 2017.

“Having been at the heart of nearly 40 transactions over the last decade, our healthcare M&A team has gained unique insights on what both buyers and sellers perceive as driving deals and investment,” said Ms Allen.