UAE healthcare M&A deal value surges as industry continues to thrive

The healthcare industry in the UAE has undergone significant growth and transformation in recent decades, in line with the country’s ambitions to become a global health hub.

Despite a decrease in the overall M&A deal volume last year, deal value rose due to notable ‘megadeals’ in the pharmaceutical (pharma) and medical technology (medtech) subsectors. It comes as investors in the UAE continue to heavily invest in the healthcare industry, with the sector adopting the latest technologies and best practices from around the world.

Globally, pharma and the biotech subsector are leading the way, with a 73% leap in deal value during 2023, despite a 10% drop in deal volume for the first nine months of the year. Notable deals included two acquisitions by AbbVie totalling $19 billion and Bristol Myers Squibb’s plan to acquire Karuna Therapeutics for $14 billion.

Medtech saw a 36% increase in deal value, even though the number of deals decreased during the first three quarters of 2023. Most medtech activity involved deals aimed at sector growth and expanding brands within it, filling portfolio gaps, or getting rid of unproductive assets.

While some large transactions had a great impact on overall deal value last year, most deals remained smaller biotech-related transactions aimed at generating growth. In 2023, 91% of transactions had a value below $1 billion, and 54% fell below $100 million. Biotech and pharma deals accounted for the majority of deal volume, while smaller medtech transactions contributed largely to overall activity.

From a private equity (PE) perspective, some PE funds are holding investments in their portfolios that are approaching the end of their targeted hold periods. This means that more assets will potentially come back into market this year. In light of this, M&A is likely to remain a prevailing exit strategy for investors as well as a key capital raising mechanism across the UAE life sciences sector.

In terms of overall growth of the healthcare sector, the UAE, particularly Dubai, is emerging as a significant hub for medical tourism. State-of-the-art facilities and specialised treatments now attract international patients seeking high-quality healthcare services.

According to the latest Medical Tourism Index ranking, Dubai and Abu Dhabi were sixth and eighth respectively, in terms of leading global destinations for medical tourism. These rankings highlight the excellent healthcare options available in both cities, making them attractive choices for individuals seeking medical treatment abroad.

Healthcare M&A regulatory challenges in the UAE

Despite the continuing activity, M&A in the UAE healthcare sector faces several challenges. These include regulatory challenges that can have a significant impact on both the success and execution of M&A deals.

Successful healthcare M&A deals in any region require thorough understanding of the regulatory landscape, proactive planning, and effective communication with regulatory authorities. Legal and compliance teams play a crucial role in navigating these challenges.

Generally, some of the regulatory hurdles businesses may face include regulatory authorities closely scrutinising M&A transactions to protect market competition, stopping deals from taking too much control of the market. The UAE recently enacted Federal Decree-Law 36/2023 on the Regulation of Competition, which comprehensively overhauled the country’s competition regime. These new amendments took effect on January 31, 2024. However, as of the end of January, we are still waiting for the executive regulations to be issued for the new law. The Implementing Regulations, which will provide more details on how the new merger control regime will operate, are expected to be released within the next six months. In the meantime, the regulations, decisions, and decrees that were issued based on the previous 2012 Law continue to be effective until they are replaced.

In the UAE specifically. we are seeing more M&A deals involving transferring licences or changing ownership of healthcare facilities, so compliance with licensing requirements is crucial.

For pharmaceutical companies, gaining regulatory approval for drug pipelines and ensuring post-merger compliance with drug safety regulations are essential.

A ‘programmatic’ approach to M&A activity in the UAE

The broader trend in the healthcare and life sciences industry involves a programmatic approach to M&A. This approach involves businesses executing a steady stream of relatively small, strategic transactions such as acquisitions to fill gaps in their portfolio or by entering promising new market segments. The approach has also seen firms sell off or wind-up underperforming parts of the business to maximise affordability and profit. For example, in the UAE specifically. 3M’s approach, a big player in the healthcare field, involves continuous innovation and strategic investments. They reduce the weight of power lines, automate healthcare data, and help manufacturers achieve more with less. Life Sciences, a company that provides automation and innovative solutions for various scientific fields, such as pathology and animal research, identifies complementary technologies or research capabilities to enhance their portfolio and is open to strategic partnerships and acquisitions.

A programmatic approach creates the most value across industries, allowing companies to proactively shape their business portfolios.

Companies should continue to navigate the challenges and seek growth opportunities in this dynamic economic landscape across the UAE to support the expected continuation of M&A activity in the second half of 2024.