As target company valuations surge takeover activity falls off. This pattern has played out fairly reliably over recent years, but the second quarter of 2021 suggests that other factors might be at play too.
The three-month period saw biopharma M&A activity virtually grind to a halt, with only one deal worth more than $1bn, and quarterly transaction values and deal counts come in at the lowest level in five years. Yet, while biotech is still in an overall bull market, the year so far has been decidedly choppy, which normally would have provided plenty of buying opportunities.
Though 2021 got off to a strong start the Nasdaq biotech index peaked in early February before falling off. It was largely the approval of Biogen’s Alzheimer’s drug Aduhelm that resuscitated the market last month, and though the index today stands up slightly year to date it is still below that February peak.
M&A during the second quarter has been conspicuous by its absence. Just 24 deals were struck, the latest Evaluate Vantage analysis finds, with their combined value coming in at an anaemic $3.2bn; this amount is well below not only the first quarter’s $20.3bn, which was already a slowdown but also the first and second quarters of 2020, during which the spread of Covid-19 nearly shut down deal-making.
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Source: Evaluate