2. Megadeals 

Megadeals are gaining pace, highlighted by three $A50 billion plus deals over the last 12 months.

3. Technology giants

Technology is playing an important role in the healthcare sector. The technology giants are starting to move into the sector, and are impacting on existing business models, supply chains and valuations of incumbent players, as was highlighted with Amazon's acquisition of US online pharmacy group PillPack.

4. Spin-offs

Spin-offs by conglomerate companies are on the rise, as they aim to get 'back to basics'.

Valuation ratios – pre & post spin-off

5. Australia is increasingly attractive

Our predictions

We expect to see robust M&A activity in global healthcare over the coming 18 months, as cashed up buyers chase an increasingly limited pool of assets that combine quality businesses with growth potential. In this environment, we should expect to see 'peak-cycle' bid premiums offered by acquiring parties, as attempts are made to lock in access to key industry sub-sectors.

Within the Australian healthcare space, we expect deal making to be particularly active over the medium term in the aged care and radiology / imaging fields. The buying parties are likely to be either industry leaders looking to access additional growth, Chinese companies after skills and 'know-how', or private equity (PE) groups that are drawn to healthcare's predictable cashflows.

On the sale side, investors' general dislike of sprawling conglomerate structures could see global majors offload units, while rich valuations and perceptions that the bull market could be ending, may entice PE firms to exit some of their holdings, including quickly "passing the parcel" on even the most recently acquired of its portfolio (such as iNova Pharmaceuticals, Icon Cancer Care, I-MED and Qscan).

Furthermore, Blackmores Limited and other smaller companies in the vitamins and health supplements sub-sector, including Probiotec, Star Combo Pharma and Vita Life Sciences, as well as infant formula providers such as ViPlus, are expected to continue to be attractive targets for foreign investors, following in the steps of Vitaco, Suisse and Nature's Care.