-- 44% of industry’s CEOs globally see business transformation as driver
Low interest rates and high stock valuations are fueling U.S. life sciences CEOs’ growing appetite for mergers and acquisitions, KPMG’s CEO Outlook found.
“U.S. CEOs are very much attuned to financial markets and the cost of capital,” said Carole Streicher, KPMG LLP’s Deal Advisory leader for healthcare and life sciences. “Investors want to see CEOs maximize returns, whether that is from cutting costs, repurchasing shares, making acquisitions that will immediately boost earnings per share, or gaining a medication, device or technology that can sustain the product pipeline.”
KPMG’s survey of life sciences CEOs found:
When asked about achieving growth objectives during the next three years, U.S. life sciences CEOs surveyed see strategic alliances with third parties (41%) as the most important approach, topping organic growth (25%), M&A (14%), outsourcing (11%), and joint ventures (9%).Compared with a year ago, strategic alliances showed the most significant increaseby 26 percentage pointsand organic growth as an approach to achieving growth objectives fell 18 percentage points among U.S. life sciences executives.
“Life sciences CEOs realize that it makes sense to find partners with capabilities in research to help bring products to market, whether that is through working with start-ups or venture partners or looking at technological solutions,” Streicher said.
The survey found that life sciences companies are planning an array of approaches to pursue growth objectives with 61% saying they will set up accelerator or incubator programs for startup firms, 57% would pursue corporate venturing and 50% said they would increase investment in “disruption detection and innovation processes.” The biggest increases in responses year over year were the interest in accelerator/incubator and corporate venturing, while the biggest decline was in partnering with third-party data providers – a drop from 48% of respondents to 27%.
Despite U.S. life sciences CEOs’ sentiment for deals and the industry’s history of multibillion-dollar, headline-grabbing transactions, CEOs from the consumer/retail, insurance, banking, manufacturing, energy, automotive, and technology sectors have an even bigger appetite for M&A. Only asset management, telecommunications and infrastructure lagged the life sciences sector in the U.S. industries in this category.
KPMG’s CEO Outlook surveyed more than 193 life sciences CEOs worldwide, including 44 based in the United States. Report was part of a broader survey conducted during the spring of 2019 of more than 2,500 CEOs at companies with more than $500 million in annual revenue.
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