The industry overview
Life science companies are preparing for an upswing in M&A activity in 2025. Expectations for improved economic conditions, a regulatory environment more favorable than those seen recently, and companies’ need to augment their pipelines suggest that there could be a strong rebound in dealmaking. Life science companies that build robust, end-to-end M&A capabilities that leverage advanced tools, comprehensive diligence, and tailored integration strategies will be best positioned to capitalize on emerging opportunities.
After an increase in deal volume in 2023—driven by a few large deals, such as Pfizer’s acquisition of cancer therapy maker Seagen for $45.7 billion—M&A activity in the life science sector fell in 2024 by roughly 24 percent, receding to 2022 levels. This reflected a cautious approach from many life science companies as they navigated a challenging economic and geopolitical landscape.
Of life science companies’ deal value in 2024, 69 percent was in the Americas; 17 percent was in Europe, the Middle East, and Africa (EMEA); and 14 percent was in Asia–Pacific. Biotechnology and pharmaceutical companies remained the primary drivers of life science M&A, accounting for 44 percent and 28 percent, respectively, of industry deal volume. Private equity (PE) activity in life science dealmaking regained momentum after a year of lower activity, increasing its share of dealmaking activity from 11 percent of industry deal volume in 2023 to 15 percent in 2024.
Opportunities for 2025—and beyond
Several factors indicate a rebound in life science M&A activity in 2025. The first is pent-up demand. Life science and PE companies both have historically high levels of dry powder. The second factor is a widening performance gap. The majority of growth has been driven by top-decile performers, and there is a widening delta between leaders and laggards both in EBITA margins and in TSR. Third, and critical, is the state of company pipelines. Multiple companies hold assets with looming losses of exclusivity by 2027, which would represent a material decline in revenues.
As a result, life science companies are preparing for an M&A upswing. To start, in light of the current market environment, they are reassessing their competitive advantages in core areas to identify areas to strengthen their strategies and build appropriate M&A blueprints. Leading players are using advanced analyses to address life cycle compression. In parallel, effective leaders are creating organizational conviction and enabling their teams to deploy advanced tools to ready their companies for action. Moreover, well-prepared companies are building financial and operational capabilities to finance, structure, execute, and integrate M&A transactions in a complex and constantly changing environment.
The year 2024 was marked by geopolitical instability, supply chain disruptions, and regulatory uncertainty (including, in the United States, the wake of the Inflation Reduction Act of 2022 and the proposed Medicare Most Favored Nation Model). All of these elements affected pharmaceutical pricing and market dynamics. But life science companies are adapting. Greater clarity should make for more favorable M&A activity in 2025.
Subsector activity
Biopharma companies, despite the slowdown in deal activity in 2024, are financially positioned to act decisively. Between 2020 and 2023, cash reserves across these sectors increased by 27 percent, providing remarkably high levels of dry powder to fund acquisitions. During the same period, the median holding period for PE firms extended from five and a half years to nearly seven years, signaling the likelihood of increased sell-side activity in the near and intermediate terms.
With growth-focused acquisitions between 2020 and 2024 accounting for 80 percent of deals—up from 34 percent a decade ago—the urgency to replenish pipelines remains a key incentive for dealmaking. More than half of biopharma revenues in 2023 were generated by intellectual property that is set to lose exclusivity by 2027. Companies are no longer looking solely for immediate revenue contributors; they are targeting forward-looking innovative assets and platforms that can deliver sustained value over the long term.
At the same time, industry deal premiums increased from 2020 to 2024, raising expectations for successful integrations and value creation. Despite high premiums, analyses of bolt-on transactions over the past two decades show that M&A has generated value across the industry, though most of the value is concentrated among 30 percent of acquirers.
MedTech companies experienced the industry’s most active year for portfolio-shaping activity since 2017 and executed their second-highest number of acquisitions of more than $1 billion in the past decade. While a broad programmatic approach to acquiring smaller, high-growth-adjacent businesses remains an evergreen strategy to accelerate near-term growth, add innovation, and access adjacencies, many of these companies follow certain key strategies.
First, they execute step-out acquisitions that target new patient pools or technology areas. This approach works well for companies seeking to transform their long-term growth plans. Increasingly, medtech companies are moving into treating unmet-need diseases and exploring nascent, high-potential digital solutions. Second, they practice portfolio simplification to divest lower-growth or dilutive assets to improve growth and margin profiles and follow through on a clear strategy. Third, they execute transactions with other at-scale companies, which helps acquirers reset their cost bases. In these cases, effective integration is particularly critical for success. The greater the synergy between the two companies, the higher the likelihood of achieving substantial long-term operating-margin expansion.
Life-science-service companies recently gained momentum and now represent a larger share of deal activity than they did in the previous year. Companies in this sector are looking to acquire complementary offerings to provide more integrated, end-to-end solutions to their clients and to cover all stages of the product life cycle. In addition, these companies often consolidate smaller players that provide specialized services, thereby streamlining operations and competing more effectively in globalized markets.
