Healthcare treads of M&A deal in 1H 2022
September 2022
As medical reform continued to deepen in the first half of 2022, the supply and demand of the healthcare industry promulgated a number of policies cantered on the strategic goal of high-quality development of hospitals, including hospital specialties construction, medical insurance reform, domestic substitution of medical device, healthcare digitalisation, hierarchical medical treatment, centralised procurement, medical qualification liberalisation and promotion of nongovernment medical services. These measures will progressively reduce the disparity between the supply and demand for medical resources, increase the efficiency of medical insurance capital, represent the value of medical services, and enhance medical technological capabilities.
As a consequence of policy tailwinds, a few subsectors within the health service have witnessed growth prospects, including the development of hospital specialties, market penetration and extension of hospital digitalisation, and technical breakthroughs driven by domestic innovation.
The recurring epidemic in the first half of the year has affected financing and M&A activities, and the capital market activity has declined compared with last year. However, in the long run, the trend of the healthcare industry remains positive. From 2019 to the first half of 2022, the deal value of China's healthcare service industry exceeds 200 billion RMB and the number of deals exceeds 1,000. In the first half of 2022, the overall disclosed value of 210 deals is $25.4 billion RMB. From 2019 to date, transaction activity remains at historically high levels. In terms of mega deals, there were a total of six transactions of over $1 billion RMB for the first half of 2022, with a deal size of $12 billion RMB.
Under the regular epidemic prevention and control, corporate agility to adapt to an unstable market environment helps lessen the pandemic's impact on investment decision-making. Meanwhile, the search of a constant core value of health service matures into a definite investment rationale.
"Based on M&A activity in the first half of 2022, we have noticed that, despite the uncertainty of investment under epidemics, service and technology remain the core values of health service, both of which underpin the investment rationale in the healthcare business. As a result, investors prefer organisations that have progressed with innovative technology or that deliver first-class service. Meanwhile, innovation serves as the primary engine for increasing the competitiveness of healthcare providers."
