2014 was quite the banner year for pharma M&A. According to EY’s annual firepower report, deals topped $200 billion–well over twice the average volume from over the past decade.
And those were just the deals that ultimately went through. Some of the most talked-about M&A storylines last year included Pfizer’s failed $118 billion-plus bid for rival AstraZeneca and AbbVie’s canceled $55 billion merger with Ireland’s Shire–moves that could have taken the buyout record into an entirely different stratosphere.
So why all the wheeling and dealing? A few reasons. When it comes to Big Pharma, companies have been jumping on the slim-down bandwagon like there’s no tomorrow to zero in on their core strengths. That’s what led Merck to unload its consumer health unit–snapped up by Bayer–and it prompted GlaxoSmithKline and Novartis’ multibillion-dollar asset swap as well as the latter’s animal health unit sale to Eli Lilly.
Then there was the tax inversion craze, which saw pharma companies snapping up their tax-advantaged counterparts overseas to lower their rates. The U.S. Treasury eventually rolled out new, stricter tax rules to discourage the practice, but not before Mylan got its hands on a Netherlands-based piece of Abbott’s generics business, for one.
Activist investing played a role, too–and Actavis reaped the rewards, locking down the top two deals of last year. Notorious proxy brawler Carl Icahn declared a victory back in February when the long-embattled Forest Labs finally agreed to sell itself to the Dublin drugmaker. And 9 months later, CEO Brent Saunders’ company expanded once again with its white knight swoop-in for Allergan, a company looking for refuge after a months-long pursuit by Valeant and its activist investor partner Bill Ackman.
While 2015 may not measure up to the historic 2014 when all is said and done, it should see its fair share of deal action, especially since none of these trends seem to be going away. Even the Treasury rules won’t stop the most determined tax inverters–just ask Pfizer CEO Ian Read, who has said more than once that his company is scouting for one. And the ball is already rolling, with Shire’s agreement for NPS Pharmaceuticals and Pfizer’s pact to buy Hospira helping kick off the year.
So stay tuned to see what 2015 has in store, but in the meantime, take a trip down memory lane with last year’s top 10 pickups. And as always, feel free to get in touch with comments, questions and the like.
By Carly Helfand and Eric Palmer