Hi guys, I am planning on using an MBA in a year or so as a class of 2023/2024 hopefully at a T10/T15/T25 (think Stern/Johnson/McDonough) and I'm a bit scared of how healthcare banking M&A looks in the future as my aspirations resonate with healthcare banking.
Especially curious about subsectors such as Healthcare services/HCIT/medical devices.
Thanks in advance!
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Why are you scared about healthcare banking exactly?
I cover HC. Currently - the COVID situation hasn't bit all of healthcare as hard as the rest of the market - especially in biopharma (although you didn't mention this vertical) and device/diagnostics as well. The biotech index has been one of the best performing sectors in the past couple of months. Moderna and Gilead in particular have killed it due to hope that they will be able to commercialize the first Virus vaccines/treatments. I'm sure many diagnostics companies have similiarily had market success recently as well due to hope they can create better COVID diagnostics.
As for services, they may truly see a rough patch due to this upcoming outbreak. I don't cover this vertical so take my opinions with a grain of salt - but these are low margin + highly leveraged businesses that may be overwhelmed by the onslaught of patients they may face in coming months.
Although you may think either of these verticals doing well/poorly may bode one way or the other for your career prospects - all that will really change is the type of work you do for clients. If the markets/your sector is hot - you may work on a bit more PP/IPO work, and if they go poorly these sectors may go be slanted more toward consolidation (ie M&A or even R/R) work. Also, what is currently is going on will likely have little effect on what's going on in capital markets later in your career - so it may be best to just focus on what's interesting to you.
I rambled a bit here but TLDR is who knows how this thing will play out - I would just worry about working within an industry you find interesting and you think has growth potential over the LONG TERM.
The biggest issue is the crowding out effect of the pandemic - if most of the healthcare resources are devoted to corona, then the budget would be much smaller for other diseases. This would be a particular issue for markets other than the US where the single-payer systems have very stringent limits on how much they could spend on healthcare. In short, maybe there're a few winners here and there that successfully develop vaccines / testing kits etc. (also it's doubtful if they can greatly profit from these due to ethical / reputational constraints) but most would get hurt in this pandemic.
This is just IMO....Expect healthcare to be on fire. The way they're streamlining the vaccines such that we're already in phase 3 trials is absurd. I think if this works, the hurdles will stay slightly more lax and drug discovery is here to stay for a bit and we'll go through a biotech boom in the short to medium term.
Healthcare, both as a whole and specific to the aforementioned sub-sectors, will be fine. COVID-19 has been a blip in the medium/long-term future of the industry with most projects and initiatives already resuming at full speed. As someone mentioned, COVID may have also had some benefits for the industry as far as regulatory, drug discovery and production aspects go. Since HC IB for the most part deals with M&A or financing in these sectors, there will still be deals, IPOs and fundraising in the sector so jobs will remain. If anything, people will need to hire more as deals become more frequent.
I wouldn't worry and just enjoy the future of the industry.
A lot of healthcare assets are market neutral. Just think about an early stage biotech/biopharma with 0 sales, is cash burning and focuses all of its efforts on R&D which it finances with d/e.
Does something like that really stop to function anymore than a company in a different sector would as a result of COVID-19?
Healthcare M&A has decreased since February naturally, but overall activity has remained about constant. It’s been offset by increase capital market activity. Consensus is that after a recession, there is typically a short lag, and then a proliferation of M&A activity.
I expect it to be quite strong. Healthcare has to be one of the least negatively impacted sectors and we have seen how far drug companies can truly push themselves to get stuff closer to market. Biopharma looks to be in good shape, as do diagnostics and med devices. Plus we are seeing the rise of digital health and therapeutic options beginning to come into play, which I expect will heavily impact the healthcare landscape in the next ten years, especially in spaces such as CNS. If anything I think the COVID vaccine "space race" may have a positive impact on the regulatory attitudes, drug discovery, and trial structure. Some banks are actually hiring during the pandemic if you can believe it. Overall I am incredibly bullish on the future of the healthcare space. I love working in it and think it is a really neat place to be in banking.
Could the outcome of the presidential election change things significantly in terms of Healthcare M&A?
yes to an extent but frankly it would be a whole lot more impacted if D's somehow got a majority in the Senate
Expect things to slow down if Biden wins. I work in the space and this is generally the consensus. Would imagine that things will even start to cool down as we get closer to the election date.
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