Healthcare: No signs of slowing down

The APAC Healthcare sector demonstrated remarkable resilience in the face of macro volatility, with deal flow in the various sub-sectors remaining persistent throughout last year. Overall, the sector has seen a robust recovery following the pandemic years, with stronger profitability among service operators and volume rebounds in elective procedures.

We anticipate this trend to continue into 2024, with several themes driving deal flow.

Companies:

• Cross-border differentiation: Wielding plenty of firepower, large-cap drugmakers are more likely to make higher-value deals in the year to come to address their growth challenges that loom later in the decade because of patent cliffs and the effects of the Inflation Reduction Act. Pharma companies will continue to deploy cash they have on balance sheets and seek out areas of innovation and clinical differentiation.
• Artificial intelligence, robotics, and data are revolutionizing the healthcare industry and will continue to fuel the medtech reinvention. These technologies allow healthcare providers to develop new sites of care and increase collaboration across the provider/payor spectrum for better patient outcomes.
• Quality services assets: The unprecedented interest from sponsor-backed strategic platforms for Ramsay Sime Darby hospitals across Malaysia and Indonesia highlights the strong interest for best-in-class or higher quality services assets.

Investors:

• Private Equity investors are interested in outsourced contract research development manufacturing organizations (CRDMO) and the specialty pharma ingredients space, where India will continue to be the beneficiary of the “China+1” supply chain theme.
• Specialist Healthcare focused GP investors, which were historically based in North Asia, will now look to geographically expand as well as diversify their portfolio investments. There has been increasing interest and participation from such GPs in recent Southeast Asia and wider APAC healthcare situations.
• Infrastructure funds are increasingly seeing Healthcare service assets as "Core+" investments, as the assets share several key characteristics, such as having high barriers to entry, inelastic demand, and being essential services. Infrastructure funds have been investing this space most notably in Australia, and more recently, some have participated in auctions in Southeast Asia and India.

Despite the ongoing macroeconomic turbulence, the Healthcare industry is well-positioned for growth, and that should spell some great opportunities in the APAC M&A in the industry this year.