06 Oct How COVID-19 is Impacting the Industry, Investment, Mergers and Acquisitions

During September, we attended many thought-provoking webinars and virtual events. These discussed the effects that COVID-19 has had on the life science industry, mergers and acquisitions (M&A) and investments. We’ve drawn insights from these webinars and put together our thoughts on how we think this pandemic is affecting the industry.

Throughout the pandemic, all of us have had to become more tech-savvy, especially regarding communication. Virtual meetings have become a staple to many, with the majority of people using video calling software such as Zoom, Microsoft Teams or Skype as their primary form of communication with their teams, colleagues and even for the weekend family quiz. Collaborative software’s and virtual data rooms such as Salesforce, Monday.com and Datasite have also seen an increase in users as businesses adapt to working from home.

The majority of the webinars we attended highlighted how important these ways of communicating and collaborating have been for businesses, especially video calls. They stated that since people have been working from home more often, companies have seen an increase in productivity with massive cost savings. This is due to people taking meetings from the comfort of their own homes and therefore haven’t incurred travel expenses or time lost travelling. Video calls have also removed social barriers and introduced a more personal way of communicating to people that you would have previously only met in a working environment. Like anything, there are downfalls; internet connectivity, the “sorry, I’ve got a few technical problems at the moment!”, and the adaptability of the sector.

Investment

The pandemic has compelled businesses to modify and adjust how they work. They have needed to adapt the way they interact with clients and customers, change their narrative by being more empathetic and increase collaboration with suppliers.

An element of this was discussed during the DeviceTalks; “Raising Capital in the ‘Zoom Age” webinar, with Karen Long of KCK Group as a panellist. Generally, investment firms prefer introductions to potential investments through their network rather than cold calls and emails with investment opportunities. Karen said how she has still been able to adapt and undertaken video calls with a couple of ‘cold opportunities’, that she may not have previously accepted. Although an introduction is always the preferred option, this highlights how video calls may have a future in supporting introductions between investment partners and new opportunities.

Karen also recommended those looking for investment to use the time they are saving on travelling less, on focusing on building an organised data room and a well-rehearsed pitch presentation. This is to be meticulously prepared for questions and to have the supporting and required documentation available. We always make these recommendations to our client as well.

Another webinar we attended; IntraLinks’ “M&A in Transformation” highlighted the importance of private equity (PE) during this period. This webinar was with senior M&A and strategy leaders of companies such as Church & Dwight (a huge player in the consumer goods sector), that revealed that PE firms are being much more aggressive. Whether buying or selling in the current market, these firms are a ‘catalyst to M&A activity’. These investment firms are being more competitive to trade buyers, with an increased ability to spend due to lower capital cost. Typically, strategic buyers aren’t too concerned bidding against investment firms that only have a financial interest in the business.

Mergers & Acquisitions

As mentioned in the IntraLinks webinar “M&A in Transformation”, there are more opportunities for M&A as an increased number of companies are looking to sell. Either they have not fared well throughout COVID-19 and are looking to secure the longevity of the business by selling, or they’ve benefited from increased sales and may get a higher price. Valuation has not changed throughout this period, but due to peaks and troughs in sales over the past nine months, evaluating the underlying value of an opportunity is a challenge for buyers and investors. This means those actively looking to make acquisitions can be more selective and look for ‘quality’ opportunities, especially PE and investment partners.

With the increased availability of M&A opportunities in the current climate, the big players are more-than-before considering smaller deals for the first time in a long time. Their strategies haven’t changed, especially geographically focused, as discussed during the webinar with panellists from the insurance, technology, business service and consumer goods sectors. Something we took away from this discussion was the quote; “2021 will be prime for consolidation”. Along with our own analysis, it is apparent across all sectors, that the big players are still actively considering M&A opportunities.

In the medical device industry, we see continued levels of appetite for acquisitions. Stryker’s still extending their tender to acquire Wright, and Smith & Nephew announcing on the 29th September their planned acquisition of the orthopaedic business of Integra LifeSciences. We are even seeing some of the smaller players growing by acquisition; Royal Biologics acquisition of FIBRINET, and the Wenzel Spine acquisition of Statera Spine.

Industry Summary

Coming from industry, we can see where the pandemic has had negative effects on the healthcare sector, but as discussed in Deloitte’s webinar; “Life Science Catalyst” by Andy Richards from Cambridge Angels, life sciences and healthcare have fared the best of all industries throughout the pandemic.

We all know the healthcare industry is resilient and versatile, and at Ortho Consulting Group, we are talking to our clients to support them during the pandemic. It’s great to hear that businesses we are working with are still keen to continue their geographical expansion plans, get investment to support their growth, and actively looking to buy new product lines or businesses.

If you would like to discuss these topics further, please contact me directly via:

Email: suzannaeverard@orthocg.com

Tel: +44 (0) 7900 662876

LinkedIn: Suzanna Everard