Our second Digital Deal Economy Study, a survey of more than 900 executives, including 72 from life sciences companies, finds executives increasingly embracing the digital imperative.
The application of digital technology has promised to advance patient outcome-focused health care to reduce costs across the value chain for years. The industry has sought to redefine its role in this new health care ecosystem as a player no longer seen as driving high health care costs through expensive drugs and devices, but as a cost-effective solutions provider for the patients its drugs and devices serve.
Life sciences companies have invested in analog services such as disease- and care-management programs with some success, but have yet to fully achieve the seamless and scalable convergence of health care and digital technology to move beyond pills and apps. They are now poised to acquire or partner with technology innovators.
Using healthcare technology to support clinical outcomes is increasingly becoming an important part of the shifting life sciences business model. M&A, partnerships and collaborations often are the quickest way to gain greater operational agility and competitiveness as companies seek market-transforming opportunities.
Digital strategy and ecosystem
As life sciences companies transform their business models, digital and technology are at the core. Digital acquisitions are clearly an important part of this strategy, and we see 60% of life sciences respondents looking at M&A, joint ventures and alliances for digital growth. They are still placing significant reliance on corporate M&A departments, which often specialize in identifying and pursuing traditional targets in the company’s own sector.
However, finding targets for digital M&A requires a new approach. Building new digital ecosystems is critical to enable companies to identify new partners and targets. This is not an easy task, as life sciences companies are driven to help build and connect with newly forming ecosystems now when no one is quite sure what the digital future holds for the industry.
Capital efficiency and portfolio review
Digital deal activity in life sciences promises to continue strongly as companies race to reimagine business models and market offerings to position for growth and innovation. Our survey respondents understand there is a cost associated with digital transformation. However, many are challenged to get their capital allocation right. When asked if they have a coherent and aligned “buy and build” approach to digital, only 46% agreed.
While organizations may be trying to respond to a fast-changing technological landscape, it is important not to make hasty decisions or prematurely react to short-term forces. Continually reviewing the business portfolio to sustain ambitious acquisition and investment goals is key to future-proofing the business.
Deal process focuses on digital
Our findings suggest an overall level of confidence around the processes companies are using to evaluate targets. However, analyzing the new types of available diligence tools, it is apparent that few are actually employing innovative methods. For example, only 19% are applying intellectual property analysis and just 11% are undertaking cyber diligence. Only 9% of life sciences respondents are focusing diligence efforts on patent review.
Rebooting M&A capabilities and processes to meet the specific deal demands of the digital environment is key to success.
Integration and talent retention
Many companies continue to use the approaches they employ to integrate traditional assets when integrating digital transactions. Digital M&A requires a much more nuanced approach and 21% of life sciences respondents say integration is the most challenging aspect of their digital acquisition strategy. Companies may also be targeting a number of digital assets at the same time, so the ability to integrate multiple digital assets simultaneously will be key to delivering potential. Realizing maximum value requires strategic integration approaches tailored to digital transactions.
Connected Capital Solutions
Capital and transaction strategy through to execution to enable fast-track value creation for inclusive growth.
Enabling fast-track growth and portfolio strategies that help you realize your full potential for a better future
Supporting better decisions around financing and funding capital expansion, and optimizing capital efficiency
Enabling strategic growth through better-integrated and operationalized acquisitions, JVs and alliances
Enabling strategic portfolio management and better divestments that help you improve value from a sale and from stand-alone businesses
Helping you transform or restructure your organization for a better future by enabling business critical and capital investment decisions
EY Global Transaction Advisory Services Leader
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