HBM Partners, an active investor in the life sciences sector, says that 2011 was a “very strong” year for companies in biopharma, with a high level of M&A activity, large and small. Its latest report says that the average return multiples to investors (based on upfront payments) for VC-backed company sales jumped to 2.8x (up from 1.6x in 2010). If further contingent payments, the potential multiple reached 4.5x. The authors say that 2011 will be recalled as a “good year by the venture capital community”.
Transaction volume from the sale of 71 North American and European biopharma companies reached USD64.1 billion. If contingent payments are included, the deal volume in 2011 reached USD70.9 billion.
There was a slowdown of M&A activity in the second half of 2011, but the transactions announced at year-end or just after that, have HBM thinking that 2012 might be another good M&A year.
The reason for optimism at HBM is it believes there are plenty of companies “looking for an exit” and quite a number of buyers with deep pockets (large and mid-sized pharma companies) who are acquiring in order to expand their commercial and development portfolios or geographic reach. “In the US, where the IPO window has opened for high-quality biopharma companies, US sellers will be in a better position to demand prices that reward them for the risks they have taken,” concludes the report. (Image Source. HBM Partners)