Sullivan & Cromwell maintained its leading position among law firms working on over $55.7 billion in health care deals announced globally this year, continuing its top position from 2022 as the sector outperformed the overall transactions market.
Kirkland & Ellis took second place, working on announced deals worth $52.5 billion, according to Bloomberg data. Wachtell, Lipton, Rosen & Katz came in third, guiding transactions worth $50.2 billion.
“This year the regulators asked some good questions about deals and got some very strong answers from industry,” said Matthew Hurd, a Sullivan & Cromwell partner who co-leads the firm’s health and life sciences practice. “We are optimistic for another good year in 2024.”
While the value of health deals announced so far this year fell 16% from 2022 to $314.1 billion, the sector was a bright spot compared with most others as companies tapped robust cash holdings on their balance sheets. The sector did $365 billion in deals in 2022, according to Bloomberg data.
Sullivan & Cromwell’s $55.7 billion is made up of 14 deals, according to Bloomberg data. The firm worked on the biggest deal of the year in advising Seagen Inc., which Pfizer Inc. acquired for $43 billion in a deal that closed this month. Wachtell advised Pfizer.
The firm also advised on UnitedHealth Group Inc.’s acquisition of Amedisys Inc. for $3.7 billion and Baxter International Inc.’s sale of Biopharma Solutions Division/Baxter International Inc. to a consortium led by Warburg Pincus LLC for $4.3 billion.
The second biggest transaction of the year was CVS Health Corp.’s $10.6 billion acquisition of Oak Street Health Inc. Shearman & Sterling, Dechert and McDermott Will & Emery advised CVS while Kirkland advised Oak Street Health.
Deep Pockets
Health sector deals benefited from the availability of cash, which shielded acquirers from the high costs of borrowing that hampered private equity activity. The acquirers were thus able to move fast and ensure their competitors wouldn’t nab potential targets first.
“Part of the life sciences story is really about acquirers wanting to not sit out an entire deal cycle,” said Jamie Leigh, partner and co-chair of the global M&A group at Cooley. They wanted “to make sure that they have a leg up in today’s tougher time by rounding out portfolios that were missing certain assets.”
Large companies were at an advantage this year because they did not have to raise funding in a slow market for venture capital financing, said Adam Golden, partner and head of US life sciences transactions at Freshfields.
“We’ve seen lots of companies announce layoffs and retrench,” Golden said. “Hopefully that will improve in the coming year.”
Some of those acquirers came in with lofty goals. Pfizer, for example, aimed to add $25 billion in revenue through mergers and acquisitions by the end of 2023 and has almost closed that goal.
More Deals Ahead
Lawyers predict an increase in deal volume in 2024.
“I don’t think there will be some massive cascade of activity,” Leigh said. “But I do think that both for private company targets and public company targets, we will continue to see robust deal-making, as well as in the reverse merger space.”
The biggest obstacle for companies wanting to do deals will be regulatory, said Keith Pagnani, who co-leads Sullivan & Cromwell’s health and life sciences practice.
“The current administration is of the view that big is bad and they’re really taking a close look at a lot of transactions,” he said. The scrutiny is “maybe sowing some doubt in the mind of boards.”
Health insurer Cigna in December ended its attempts to acquire rival company Humana in a deal that would have created a company with a value larger than $140 billion. “There’s a lot of antitrust constraint overall in the health insurance space,” Pagnani said.
Pharmaceutical pricing constraints may also influence dealmaking. The Inflation Reduction Act policies allow the government to set pricing for certain drugs. “It has caused a little bit more of a focus in terms of how deals are structured” and which transactions are pursued, Golden said.
Drug pricing mandates affect large pharmaceutical companies, Hurd said. “As a general matter, the degree to which small, innovative companies are exposed to government price controls is hugely less,” he said.