Political uncertainty isn’t likely to drag down M&A in healthcare

Political unrest isn’t taking much of a toll on deals in the healthcare sector, according to new data from Merrill Corp.

In fact, more than half––52%––of M&A professionals see the healthcare M&A market moving in a positive direction, Merrill’s poll of more than 200 respondents revealed. That’s a 12% jump from Merrill’s November poll. Another 48% said the market was headed in a neutral direction. However, 35% said political uncertainty is the biggest threat to completing deals.

That could be because there is a major debate over the direction of the American healthcare system as the 2020 election inches closer. Many Democratic presidential candidates are pushing for universal healthcare, or Medicare-for-all plans, while Republicans are still working on peeling back more of the Affordable Care Act. The fate of the ACA is also in the crosshairs after a federal judge ruled the entire healthcare law was unconstitutional. The lawsuit, brought on by more than 20 Republican governors and attorneys general in 2018, is currently in the appeals process.

In addition, international factors such as Brexit, or the U.K.’s planned departure from the European Union, could put stresses on transactions. A huge labor demand in the industry and technology overload are additional challenges.

“The healthcare landscape is becoming increasingly difficult for dealmakers to navigate, as the U.S. enters a major election season and questions still surround the details of Brexit,” Rusty Wiley, CEO of Merrill Corporation, said in a statement. “On top of this, the healthcare industry is still grappling with how to operationalize and protect vast amounts of data, as well as how to attract the technology talent needed to capture that opportunity.”

Behind political uncertainty, M&A professionals cited investor confidence (22%), data privacy (21%), antitrust/competition 14%) and national security regulations (6%) as factors that could sink healthcare deals.

Still, the positive outlook fares well for the healthcare space, with 44% of respondents identifying healthcare IT as the richest investment opportunity, followed by next-generation sequencing (22%), medical marijuana (20%) and point-of-care delivery and immunotherapy (19%).

“This aligns with the steady stream of transaction activity we are seeing from our healthcare and life sciences clients,” Wiley said. “The number of projects we are managing is up almost 12% compared to the same time last year. The shift to a technology-based business environment is pushing life sciences and healthcare companies to acquire or form partnerships to build better data and customer-centric capabilities.”

Still, 35% of respondents noted talent assessment as the hardest part of getting a healthcare or life sciences currently, while 22% said data privacy compliance and 16% said regulatory compliance.