M&A in the UAE healthcare sector is on an ever-best surge- Experts all over the world write and speak across the news and columns. But what happened behind the scenes in its run to 2024?
The United Arab Emirates (UAE) has emerged as a global healthcare hub, characterized by its rapid growth, advanced infrastructure, and increasing reliance on technology. This transformative landscape has ignited a surge in Mergers and Acquisitions (M&As) within the region. The Emirates of Dubai and Abu Dhabi have taken the lead, driving the sector’s expansion and solidifying healthcare as one of the UAE’s most rapidly growing industries. As healthcare providers seek to expand their reach, enhance capabilities, and capitalize on emerging trends, strategic partnerships, and acquisitions have become essential tools for growth.
The Rise of M&A in the UAE Healthcare Sector
M&A in the UAE’s healthcare sector has gained momentum, particularly in HealthTech and MedTech assets. Investment firms have recognized the potential in these areas, leading to a shift from provider consolidation to strategic asset acquisition. As corporations re-evaluate their business strategies, healthcare sector investments are being approached with caution but with a clear focus on long-term value.
In the short to medium term, several regions in the UAE are expected to become M&A magnets within the healthcare industry:
- HealthTech Tools: To address critical challenges, improve employee performance, and optimize processes, healthcare providers are increasingly turning to HealthTech tools such as artificial intelligence (AI), analytics, and cloud technologies.
- Telehealth: Telehealth is a way to receive healthcare services remotely through electronic devices like your computer, tablet, or smartphone. While still a modest component of most healthcare solutions, telehealth is gaining traction as providers explore specific areas where it can enhance existing capabilities.
- MedTech Services: As MedTech services evolve from experimental to mainstream, providers are incorporating these services to improve patient care. Leading institutions are expected to build their value propositions around a combination of skilled physicians and comprehensive MedTech support.
- Value-Based Care: Relevant partners are continuing efforts to standardize practices to support value-based care, aiming to improve patient outcomes while managing costs.
Looking ahead, M&A in the UAE Healthcare Sector is expected to see more decisive transactions, with sustained growth in the tech-enabled health sector. The future of healthcare M&A in 2024 is all with opportunities and challenges. Investment funds are likely to play an increasingly vital role by taking dominant positions in HealthTech assets. As the fundamental pillars of the industry remain strong, the forecast for M&A activity in the UAE remains favorable.
Understanding Regulatory Challenges of M&A in the UAE Healthcare Sector
Despite the continued activities around M&A in the UAE healthcare sector, several challenges persist, particularly on the regulatory front. These challenges can significantly impact the success and execution of M&A deals, requiring businesses to have a thorough understanding of the regulatory landscape.
Successful healthcare M&A deals necessitate proactive planning and effective communication with regulatory authorities. Legal and compliance teams play a crucial role in navigating these challenges. Key regulatory hurdles include:
- Market Competition: Regulatory authorities closely scrutinize M&A transactions to protect market competition, preventing deals from giving any single entity excessive control. The UAE’s recent enactment of Federal Decree-Law 36/2023 on the Regulation of Competition took effect on January 31, 2024, and represents a comprehensive overhaul of the country’s competition regime.
- Licensing Compliance: With more M&A deals involving the transfer of licenses or changes in ownership of healthcare facilities, compliance with licensing requirements is crucial.
- Pharmaceutical Regulatory Approval: For pharmaceutical companies, gaining regulatory approval for drug pipelines and ensuring post-merger compliance with drug safety regulations are essential.
Embracing a Programmatic Approach to M&A
A broader trend in the healthcare and life sciences industry involves adopting a programmatic approach to M&A. This strategy entails executing a steady stream of relatively small, strategic transactions, such as acquisitions to fill gaps in portfolios or entering promising new market segments. This approach has also seen firms divest underperforming parts of their business to maximize profitability.
For instance, 3M, a significant player in the healthcare field globally, exemplifies this programmatic approach through continuous innovation and strategic investments. The company focuses on reducing the weight of power lines, automating healthcare data, and helping manufacturers achieve more with less. Life Sciences, a company providing automation and innovative solutions for various scientific fields, identifies complementary technologies or research capabilities to enhance its portfolio, remaining open to strategic partnerships and acquisitions.
A programmatic approach enables companies to proactively shape their business portfolios, creating the most value across industries. Companies in the UAE will continue tackling challenges while seeking growth opportunities in this dynamic economic landscape to support the expected continuation of M&A activity in the second half of 2024.
What Grabbed the Headlines in the Last Two Years of M&A in the UAE Healthcare Sector?
- M42 Joint Venture: Formed by Mubadala’s healthcare division and G42, M42 focuses on using AI and technology to enhance healthcare delivery and precision medicine in the UAE and beyond.
- Aster DM Healthcare Expansion: Aster announced expansion plans across the UAE and GCC, focusing on integrating digital health solutions to improve patient care and accessibility.
- Pure Health and SEHA Merger: Pure Health merged with SEHA and Daman, creating one of the largest healthcare platforms in the region, aimed at streamlining healthcare delivery and improving patient outcomes.
The USD 232 million deal was closed with a significant EBITDA multiple of 10.5. Other key deals include ADQ’s merger of its healthcare entities Rafed and Union71 with Dubai-based Pure Health, Yas Holding’s acquisition of Geltec Healthcare FZE (part of a renowned pharma and nutraceutical group) and International Holding Company (IHC) acquiring a 40% stake in Response Plus Medical Services (RPM), a unit of VPS.
The Growing Demand for Business Valuation and Due Diligence Services
With numerous healthcare enterprises establishing their foundations in Dubai and Abu Dhabi, the need for business valuation and due diligence services is becoming increasingly critical. The shift in focus and the rising activity within the sector globally have heightened the demand for accurate valuations and thorough due diligence processes. This trend underscores the importance of these services in facilitating successful M&A transactions.
MS can help you with this. Our expertise ensures that you have the insights and guidance needed to tackle the complexities of business valuation and due diligence, allowing you to focus on the bigger picture – your business’s success. Let’s make the deals work for you.
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