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Health executives enthusiastic about global economic growth

Global Capital Confidence Barometer | Health | 17th edition

CCB17 results: welcome optimism among health executives

Health executives are very enthusiastic about global economic growth — 83% see a further improvement, up from 67% six months ago. As a result, the confidence in market fundamentals has also increased, with 98% of the health respondents expecting global corporate earnings to either improve (60%) or remain stable (38%). On the M&A front, 43% of health executives plan to engage in dealmaking, up from 36% in the last edition. While this increase signifies optimism, it remains slightly below the historical health average of 46%.

Disruptive forces: consumerism and convergence

About 30% of health respondents think changing consumer behaviors are the most disruptive force impacting the health sector. And rightly so, as the power of the patient or consumer to engage and participate can define an organization’s success today. Sector convergence emerged as the second most disruptive force. Consumerism and technology have also pulled non-traditional players into the sector. And traditional health providers and payers are collaborating, as well as competing with these newer entrants.

Top boardroom agenda: digital transformation and its impact on business models

Health executives highlighted the impact of digital technology and transformation on their business model as the top boardroom agenda item. Seventy-three percent of health respondents prefer to be more proactive in managing this disruptive force, as well as the threat emerging from digitally enabled competitors and start-ups. In response to the digital transformation, health organizations are willing to both develop in-house capabilities and to hire executives with the right skillset from inside or outside their industry.

Shareholder activism: on the rise

Health companies are among the most targeted by activists. There have been recent instances where activist investors have pressured health organizations to unseat CEOs and board members, and rethink their growth strategies. Thirty-nine percent of health respondents expect the shareholder activist campaigns to increase further in the next year, while 56% of respondents believe their activity will remain about the same. Although this is a US phenomenon, the prevalence of shareholder activism is slowly building in Europe and Asia.

M&A outlook: rebound in deal activity

Intentions to pursue M&A activity have increased compared to six months ago (43% vs. 36%). Thirty-eight percent of health respondents also expect the health M&A market to improve in the next 12 months.

Pipeline remains stable as 70% of executives see no change, while the remaining 30% are more optimistic and expect their M&A pipeline to increase. Health sector executives’ confidence in deal completions has also increased substantially — 33% foresee an increase in deal completions compared to just 13% six months ago and 24% last year.

  • Key M&A drivers: acquiring new customers and innovation
    Twenty-seven percent of the health respondents voted for market share growth as the key strategic driver for pursuing M&A — in line with executives from other industries. Acquiring innovation — technology, innovative start-ups, etc. — emerged as the second-most strategic driver to investment activity.
  • Private equity may feature more prominently in coming months
    Nearly half of the respondents (44%) expect to see increasing competition for assets in the next 12 months. And the majority of these respondents believe that competition will come from private equity funds looking to deploy record dry powder in the coming months.
EY - W. Gregg Slager

W. Gregg Slager

EY Global Health
Transaction Advisory Services

+1 212 773 8041

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