After a challenging few years, the European healthcare M&A market has started to show renewed momentum, and both British pharma and distressed assets are top of the list.
Initial indications are that after a couple of challenging years characterised by higher interest rates, regulatory uncertainty and geopolitical pressures, the European healthcare M&A market has started to show renewed momentum.
US interest in the London private hospital sector is well known. Six large US operators now make up almost 50% of private supply, according to a new report from Candesic and Barclays. But it goes beyond that.
“We believe Europe is drawing increased attention from global investors, with renewed interest in high-quality, platform-ready assets with strong growth potential,” notes international investment bank DC Advisory in its latest report on European healthcare.
The report highlights an increasing interest from Asian investors in Western assets, particularly in Europe, as geopolitical tensions and what it calls “the complex US-China relationship” make Europe an attractive alternative.
The report highlights Tokyo-listed medical device company Terumo’s acquisition of British organ preservation technology company OrganOx for around $1.5 billion (£1.1 billion) as key.
Speciality distribution stands out, where scale and resilient supply chains are crucial for success. Medtech outsourcing is also gaining traction, as efficiency and cost optimisation drive demand. Asset-light patient services are attracting both strategic and sponsor interest, offering scalability and attractive economics. Finally, pharma services are showing early signs of growth, supported by an uptick in clinical trial starts and the ongoing need for greater efficiency in drug development.
Strategic buyers are becoming more active, often pursuing carve-outs to streamline their portfolios and reinforce their core focus areas. This trend reflects a broader shift toward operational discipline and targeted growth.
From a capital perspective, there is renewed momentum from private equity, including growth investors. “We see this as a strong bellwether for broader market activity. When growth capital becomes active, it typically signals rising confidence in the market outlook,” the report says.
Pharma in the headlines
Confirmation that pharma services are in the headline comes from the UK BioIndustry Association’s (BIA) annual report. It argues for a structural shift in the UK life sciences sector: Techbio has moved from a niche field to the mainstream.
This period of sector maturation, it says, is anchored by more than £2.6 billion in total capital secured by techbio companies between 2020 and 2024. This investment, comprising £1.5 billion in venture capital and major public listings, provides undeniable validation that UK science is creating value.
The report highlights landmark deals such as the £489.6 million acquisition of Exscientia by Recursion and substantial follow-on funding secured by leading platforms like Oxford Nanopore and BenevolentAI.
Growth so far this year has been highlighted by significant funding rounds from companies like Isomorphic Labs and CHARM Therapeutics, alongside NVIDIA’s commitment to the next wave of AI innovation.
“Key for the UK as a whole is that we have an opportunity to advance productivity and growth through the technological advances in artificial intelligence, life sciences and robotics that we celebrate in techbio – if we are able to grasp this opportunity for the UK, if the government is able to continue on what it has promised in the sector plans through consistent implementation, then the potential will be truly transformative,” said BIA’s managing director Jane Wall.
Distressed levels
While the attraction for pharma services is one clear attraction, another is the level of distressed assets, which piques the interest of private equity.
The latest third quarter edition of the Weil European Distress Index (WEDI) finds healthcare the fourth most distressed sector in the index.
Distress has eased compared with both the previous quarter and the same period last year. Nonetheless, levels remain elevated relative to the long-run average.
What has hit the sector is persistent cost inflation, rising wage pressures, and limited access to private capital, which continues to strain cash flow. Subdued investment appetite and tighter regulatory scrutiny, it adds present additional headwinds.
The outlook remains cautious for the rest of the year. Falling profits, strained cash reserves and nervous investors are keeping conditions fragile, with the Autumn Budget on 26 November looming as a major test.
“Economic activity stalled in July, underscoring the challenge facing policymakers in revitalising growth. Uncertainty remains over the fiscal measures that may be introduced in the upcoming Budget to address the widening gap in public finances,” the report says.
