Finally a 'Big Deal' Breaks Out... Pharma, Bio, and Healthcare Ignite the M&A Market

GeoYoung Acquired by MBK Partners... Biggest Deal of the Year
Macquarie PE Named Preferred Negotiation Partner for Genewon Science
Pharma, Bio, Healthcare Lead M&A Deal Value in 2023

The stagnant domestic mergers and acquisitions (M&A) market is being revitalized by the pharmaceutical, bio, and healthcare industries along with private equity fund (PEF) managers. In these sectors, 'big deals' worth trillions of won are being successfully closed or are on the verge of completion one after another. This marks a continuation of the strong trend that has been prominent since last year.

According to the investment banking (IB) industry on the 23rd, MBK Partners, the largest domestic PEF manager, recently signed a stock purchase agreement (SPA) with the U.S.-based PEF manager Blackstone for the acquisition of GeoYoung. The acquisition target is 71.25% of the shares of GeoYoung's holding company, Chosun Hyeji WY Holdings, with a valuation of approximately 2 trillion won. Both parties plan to finalize the deal within the first half of the year. This is the largest big deal so far this year in terms of transaction size. GeoYoung is the number one pharmaceutical wholesaler in Korea.

The Only 'Growth Sector' Last Year... Favorable Winds Continue This Year

MBK Partners has a strong connection to the healthcare industry. Last year, it acquired Medit, a dental scanner solution company (2.4 trillion won), and Osstem Implant, an implant company (2.5 trillion won). Not only MBK Partners but also the market's interest in pharmaceutical, bio, and healthcare companies is intense. Earlier this month, another PEF manager, Macquarie PE, was selected as the preferred bidder for Genewon Science, a contract development and manufacturing organization (CDMO) for pharmaceuticals. They will have an exclusive negotiation period with the largest shareholder IMM PE until the 30th to discuss detailed transaction terms. The main contract will be signed afterward. The valuation is rumored to be around 1 trillion won.

The domestic M&A market had no big deals worth trillions of won closed in the first quarter. However, this month alone, two deals in the pharmaceutical, bio, and healthcare sectors have either been completed or are close to completion, injecting vitality into the overall market. This is not a sudden phenomenon this year. According to the '2024 M&A Market Outlook Report' published by accounting firm Samil PwC in February, the pharmaceutical, bio, and healthcare sector ranked first in transaction value among seven sectors last year. It was the first time in the past five years that this sector took the top spot. With a transaction value of 18.4 trillion won, it accounted for 23% of the entire M&A market. It was the only sector to see growth in transaction value compared to 2022. The other six sectors are IT, telecommunications & media, industrial goods and automobiles, government & public, finance, energy, utilities & materials, and consumer goods.

Experts agree that "the greatest attraction is that it is a growth industry with a bright future." Kang Jisoo, Executive Director of BNH Investment, which focuses on bio and healthcare investments, said, "Due to issues like low birth rates and aging, many industries raise questions about whether they can continue to be sustained in the future," adding, "Interest in improving quality of life, such as wellaging, is gradually increasing, so growth is certain, and the best way to enter this industry is through M&A." Wellaging means 'aging beautifully and healthily' and is a trend gaining attention as the senior population increases.

PEFs Leading the M&A Market... Trend Expected to Continue for the Time Being

Furthermore, the role of PEFs, which have recently been leading the M&A market, is strengthening. Not only GeoYoung and Genewon Science, but also Noksu, whose valuation is rumored to be around 1 trillion won and is being sold by the U.S.-based PEF manager Texas Pacific Group (TPG), has Stick Investment, a domestic PEF manager, as its preferred bidder. Although below 1 trillion won, SK Rent-a-Car, which closed an M&A deal worth 850 billion won, was acquired by the Hong Kong-based PEF manager Affinity Equity Partners. All these deals occurred this month.

Samil PwC analyzed in its report that "due to macroeconomic uncertainties and high interest rates, M&A activities by domestic large corporations have significantly decreased, and PEFs are leading the market." Kim Yumi, partner of the financial advisory division at Samjong KPMG, said, "There is still a considerable amount of undrawn committed capital (dry powder) from PEFs, and the fund sizes of their major investors, such as pension funds and mutual aid associations, are also growing," adding, "The trend of PEFs leading the M&A market is expected to continue for the time being." Looking globally, the total dry powder of PEFs is at an all-time high of 4 trillion dollars (approximately 5,500 trillion won).