The Trend in the Late-Stage M&A Market Last Year Was 'Pharmaceuticals, Bio, and Healthcare'

At the end of last year, one out of every four domestic mergers and acquisitions (M&A) cases was in the pharmaceutical, bio, and healthcare sectors. Although these sectors experienced a downturn for several years following COVID-19, long-term demand has been secured through aging populations and technological innovation, and funding has normalized, leading to expectations that the related M&A market will become even more active this year.

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According to the investment banking (IB) industry on the 11th, out of 21 major M&A contracts disclosed in December last year, 5 were in the pharmaceutical, bio, and healthcare sectors.

Last month, bio regenerative medicine company CJ Bio announced that it acquired a 23.54% stake in orthopedic medical device company Innosys for 32.5 billion KRW. CJ Bio has been developing spinal and orthopedic medical devices, including the bio-convergent medical device bone substitute 'Novocis'.

In the same month, pharmaceutical specialist Dong-A ST acquired Aptis, a developer of antibody-drug conjugates (ADC). ADC is a next-generation cancer treatment technology that effectively eliminates cancer cells. Along with acquiring Aptis's management rights, they also secured its technology and pipeline (products under development).

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Around the same time, Kwangdong Pharmaceutical purchased a 58.74% stake (6,211,054 shares) in health functional food company BL Healthcare for 30 billion KRW. BL Healthcare has also ventured into bio new material research and functional cosmetics business. Pharmaceutical company Huons secured management rights of finished drug manufacturing and sales company Crystal Life Science through providing collateral for Crystal Life Science's outstanding debts.

MBK Partners, the largest private equity fund manager in Korea, signed a stock purchase agreement (SPA) worth 90 billion yen (approximately 820 billion KRW) to acquire management rights of Japan's Hitowa Holdings. Hitowa Holdings operates 140 nursing homes for the elderly in Japan.

These companies that succeeded in M&A aim to create synergy effects with their existing subsidiaries or parent group affiliates' bio and health businesses through these contracts and secure future growth engines. An IB industry expert said, "The Korean medical device sector is competitive in terms of price compared to advanced companies in the U.S. and Europe, and in terms of quality compared to Chinese companies. As the value of the K-brand has risen overseas, the performance and stock prices of domestic medical device companies also increased last year, leading to active M&A. This trend is expected to continue this year."

Mike Guayto, Global Head of Healthcare at JP Morgan, said in his opening speech at the JP Morgan Healthcare Conference held on the 8th (local time) in San Francisco, USA, "Private equity funds are returning to the pharmaceutical and bio industries, and M&A will fully resume." He forecasted that innovations in diabetes, obesity, autoimmune diseases, and central nervous system therapeutics will lead the M&A market this year.

Meanwhile, other year-end domestic M&A cases occurred in logistics, shipping, semiconductors, IT, and auto parts sectors. IT service company Bitsrosis recently completed an acquisition contract for HLB Elec, a specialist in industrial automation and logistics hub automation construction. Harim Group and JKL Partners acquired a 57.9% stake (398,791,560 shares) in shipping company HMM for about 6.4 trillion KRW and were selected as preferred negotiation partners. Foreign private equity firm Kohlberg Kravis Roberts (KKR) acquired 100% of logistics company Taeyoung Industry's shares from TY Holdings and the owner family for 240 billion KRW amid Taeyoung Construction's workout (corporate financial restructuring) crisis.

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