KPMG says deal activity will stay high in ’21: 10 takeaways

Deal activity is likely to remain elevated in the healthcare and life sciences sectors in 2021, although there will be winners and losers when it comes to valuations, according to a new KPMG survey of almost 300 industry executives and investors. Here are 10 key takeaways from KPMG’s findings:

1) Biopharma, healthcare IT and diagnostics companies are expected to enjoy higher valuations this year due to their ability to withstand change and innovate.

2) At the same time, valuations aren’t expected to change significantly in other subsectors of healthcare, such as physician practices, behavioral health and hospitals. Brett Glover, deal advisory leader with KPMG U.S. healthcare & life sciences, said valuations in those areas are already “extremely high,” and survey respondents believe they’ll hold steady rather than increase further.

3) Despite the COVID-19 pandemic, the volume of healthcare and life sciences deals jumped 15% in 2020 year-over-year. While the average value of deals was lower, the number of transactions was still higher.

4) Telehealth companies received most of the record-breaking $6.5 billion in funding provided to the digital health sector during the first six months of the pandemic. The sector ranked among the top for health IT investments in the coming years.

5) Hospitals and health systems are believed to be at the highest risk, with 46% of respondents predicting lower valuations in 2021 compared with 2020. “Obviously they’ve been under extreme financial stress during 2020, and it doesn’t appear that stress is completely behind them as we go into 2021,” Glover said. “I think pricing reflects that.”

6) Another 39% of respondents think valuations will increase this year for hospitals, however. Glover said that could reflect both uncertainty in the market and the disparity in performance across large health systems and small ones.

7) Behavioral health roll-ups are expected to increase this year to meet demand from higher numbers of patients suffering from depression, anxiety and substance use disorders brought on by the pandemic.

8) Biopharma had the most active deal market in history in 2020, with 384 deals. More than 80% of pharmaceutical executives surveyed said their valuations increased last year.

9) More than 60% of diagnostics manufacturers who responded to the survey said moving into COVID testing has allowed their companies to make more deals.

10) Among private equity and venture capital respondents, 64% said another wave of COVID-19 cases would not impact their deal volume in 2021. KPMG’s Glover said he thinks that’s because the market is becoming more accustomed to the surges. Private equity-owned healthcare providers have also seen patients return. “I believe there is optimism on a line of sight for volume recovery,” he said.


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