Global deals activity has had a slow start in 2012. M&A remained depressed during Q1 2012, reflecting continued economic uncertainty in global markets. Contributing factors include lower risk tolerance driving more cash to the sideline, smaller deal sizes, fewer European deals, and a decline in private equity participation.
Q1 2012 pharma M&A deal volume improving but still sluggish. Q1 2012 had an increase in pharma deal volumes from the prior quarter, but remains below levels experienced in 2010 and early 2011 averages. Deal sizes declined in the quarter – a trend continuing since summer 2011. Pharma companies continue to be strategic and focused, looking for good molecules with some level of proven development (the more the better), all while managing the investment risk. The looming patent cliff will continue to influence these decisions.
2012 includes a slow but improving outlook. Looking ahead for the rest of the year, we expect a softer global economic outlook. Distressed global credit and sovereign markets will continue to slow deal activity well into 2012. We expect good assets will command high multiples and valuations may be driven up further by the relatively few number of deals and scarce capital available. Once market conditions improve, strong corporate balance sheets and significant amounts of un-invested private capital support an improving M&A outlook.