The complex dynamics driving M&A in pharma

According to the consultancy Novasecta, the consolidation trend in the pharma business will continue in 2017, although prices paid by investors are significantly higher (SALESx) than in other sectors. The average price for an acquisition in 2016 was 39 times the revenue of the acquired company, compared with 19 times in 2014. The median value of an acquisition in 2016 was $1.97bn, yet the announced number of deals fell from 86 (2015) to 78. This is most likely due to US corporates waiting for Donald Trump to propose a much-anticipated plan to cut corporate taxes. Should fiscal pressure decrease, many companies would repatriate billions of dollars of cash generated by overseas subsidiaries, which are not being repatriated now, due to high taxes on their incomes. Repatriation of such capitals to the US could give rise to a new spate of deals in the second part of 2017. John Rountree, from Novasecta, said that consolidation will include drastic price cuts and relevant acquisitions. The most acquisition-driven companies undoubtedly include Allergan, which has the financial soundness and attitude to perform significant acquisitions. (Source CNBC & FT)