Insight

2021 Healthcare and Life Sciences Investment Outlook

A video providing key highlights on the 2021 investment market

Kristin C. Pothier

Kristin C. Pothier

Global and National Healthcare and Life Sciences Strategy Leader, and Global Deal Advisory Leader, Healthcare and Life Science, KPMG US

+1 617 549 2779

Brett Glover

Brett Glover

Partner, Financial Due Diligence, KPMG US

+1 214-840-8579

Larry Kocot

Larry Kocot

Principal, Advisory, KPMG LLP

+1 202-533-3674

On January 25th, KPMG will release its 2021 Healthcare and Life Sciences Investment Outlook, informed by a fifth annual market survey of hundreds of healthcare and life sciences executives. The Outlook provides insights on how ten subsectors have fared during the past unprecedented year of the global pandemic, and what we might expect for deal activity in these subsectors in 2021 and beyond. It also explores how the 2020 presidential and congressional elections will impact policy priorities and the regulatory agenda in the year ahead.

From a healthcare perspective, merger and acquisition activity slowed in the second quarter of the year before beginning to rebound in the second half of the year. Although total deal activity in healthcare slowed relative to 2019, private equity and corporate investors remained interested in identifying new opportunities for growth and partnerships. We also saw strong activity in Healthcare IT, accelerated by the pandemic with telehealth and the move to alternative care settings. We expect continued deal activity in healthcare IT and in risk-based physician practices as the industry continues reacting to changes in care delivery brought about as a result of the pandemic.

In Life Sciences, we saw the organizations in 2020 that pivoted to COVID-19-related products and services bounce back rapidly, and are now attracting more investment interest. Given the need for diagnostics, vaccines, and treatments for COVID-19 and a continuing focus on breakthrough innovations, the biopharma subsector, in particular, had a strong year financially, which is expected to carry over into 2021.

KPMG 2021 HCLS Investment Outlook Video

Video transcript

Larry Kocot:

Hi… I am Larry Kocot, a Principal at KPMG and National Leader of the Center for Healthcare Regulatory Insight at KPMG. I am very pleased to be joined by Brett Glover and Kristin Pothier, to share a brief preview of our annual Healthcare and Life Sciences Investment Outlook for 2021, which we’re going to be releasing in the coming days.

Despite the economic and social disruption caused by the global pandemic, along with the very difficult election season that we went through in 2020, deal volume in 2020 far outpaced that of 2019, particularly in Life Sciences and Pharmaceuticals, Healthcare IT, and Medical Devices and Supplies.

With a new President and new Congress, our national focus will undoubtedly remain on the pandemic and economic recovery, but what other policy changes might impact investment decisions in the coming year? What sectors will attract the most investor interest; and will the pace of deals continue into this new year?

Our 2021 Investment Outlook will bring insight to these and other important investment questions based upon a comprehensive survey of hundreds of senior industry executive respondents who provide key insights on what we might expect for investment in the coming year. In addition to understanding where and how investors are prioritizing their investment focus, our Investment Outlook contextualizes the investment landscape through the lens of key policy and regulatory trends and insights, which are so important to the investment calculus in the heavily regulated heath care and life science industries.

This is the fifth year that we’ve done the Investment Outlook survey and we look forward to sharing our insights for what promises to be a very interesting year as we look forward to getting beyond COVID-19 and onward to economic recovery.

I’ll now turn it over to my colleagues Brett and Kristin, to share perspectives on trends in the deals environment over the past year and what we might expect to see in the year ahead.


Brett Glover:

Larry, needless to say 2020 was definitely an unusual year.

  • When we think of M&A, it was basically a tale of two halves.
    • The year started active, but took a hard pause, as the world adjusted to COVID
    • We saw what felt like pent up demand or the paused deals working back through the system during the summer and then in September the market roared back.
    • We saw signals that the market would be active post summer, but I don’t think any of us expected the volume of transactions
  • BUYERS: As we think about the type of buyers, we basically saw both corporate and PE being very active. We also saw SPACs take an active role in the market. While SPACs are not necessarily new entrants, the volume of SPACs and competition for appropriate assets is definitely.
  • Let's talk about the types of deals we saw for a second
    • On the Healthcare side, we have to segment the market. As expected, the deal flow heavily follows businesses with minimal impact by COVID
    • While most providers had volume interruptions due to COVID, the market was much more active with sectors could show either a clear path to recovery or volumes had recovered.
      • For top tier assets, price and competition for these assets was as high as it has ever been. But the next tier down, "nice assets or models with a nuance"....the market was much more particular. 
      • On the other end of the provider spectrum, lower acuity or more retail healthcare assets, generally were more challenged to prove the compelling "recovery" and were not absent from the market, but the volume was substantially down.
  • Our Health System and NFP clients were also a little less active in the second half of the year. While that is a very broad market, they generally are very methodical and can often collectively take a more wait and see approach than other M&A participants.  Additionally, their businesses were much more impacted. As we approached the end of the year, we did see signs of activity that bode well for 2021.
  • As we toggle over to other areas of Healthcare, risk bearing assets and HCIT assets were extremely active. In general, these assets had less of a negative impacted by COVID and depending on the business model often saw tailwinds.
  • One of the more interesting trends, was the risk bearing provider businesses, which are heavily PCP’s taking risk. The market has been very interested with these business models, but the volume of deals in the second half involving both public and private equity makes it more unusual than past years. 
  • And finally, HCIT. the telehealth sector broke investment records in 2020 with $6.5 billion in funding. 55 U.S.-based telehealth companies received funding and over 10 telehealth acquisitions occurred
  • On the Life Sciences side, we saw generally a similar story on deals involving winners. But I will turn it over to Kristin to provide more color. 


Kristin Pothier:

The LS side was equally special in 2020 on both a global and a national scale.

As the world locked down in March, deals dried up. For a few months, companies refocused on finishing deals that were in process, executing integration or separation of completed deals, and refreshing pipelines as we all weathered the pandemic.

2020 Recap

Able to keep each point on the screen as they roll in

Biopharma: Overall higher deal volume

Biopharma services: Innovation in virtual

Diagnostics: Finally having its day in the sun

However, global LS is at the heart of COVID-19, and companies able to combat the pandemic with new products and services bounced back. With exception of very specific subsectors, life sciences companies have now rebounded and deal-making resumed with transactions focusing on cell and gene therapies, biopharma and lab services, and precision medicine-based therapeutics and diagnostics.

Dx company acquisition volume actually increased in 2020. We saw new acquisitions all based on the innovation in the space around novel testing and supporting targeted therapeutics, which is expected to continue.

Although some diagnostics labs lost 75% of their volume, those that were able to shift volume or build out capacity to for COVID-19 testing had sizeable revenues. Overall reference lab-related deal volume remained steady in 2020, with an increase in interest in labs by new types of investors. 

So, what will be the pattern of M&A in 2021?

2021 Predictions

Healthcare: A new normal

Biopharma and Diagnostics: Focus on Innovation

Medical Device: Return to Patient Care

Our healthcare subsectors have been significantly strained by COVID-19, but this also has resulted in innovative shifts in care delivery, especially in telehealth, alternative care sites, and home-based care, and we expect continued interest in partnerships and deals in those forward.

Cell and gene therapy, biopharma and lab services, and companies that contribute to the pace at which COVID vaccines and therapeutics need to be developed and/or manufactured will be special focuses.

We expect to see more deals in molecular diagnostics. These targets are attractive because they offer platforms to drive growth. Other opportunities exist in moving drug discovery to clinical and less-invasive sampling (such as point of care and liquid biopsy).

Medical device, most negatively affected by COVID-19, is still acquiring core and divesting non-core, signaling a renewed discipline and plans for a full rebound

Finally, as we look into 2021, partnerships are just as interesting as deals. We participated in first-hand with our work with Bioreference and the NBA keep players playing, but also working with our medical institutions, states, labs, and other large employers. Partnerships have given investors more confidence to get creative in their approaches and view the resiliency of some companies to thrive during this pandemic. 

2020 will be a year that in any language is unprecedented for what COVID-19 has done to our health systems, our economy, and our deals worldwide, and our learnings will carry us into the next decade. KPMG has developed a series of events to kick off 2021 and continue to release our insights on the market.

KPMG Healthcare and Life Sciences Events

Jan 14: Leavitt Linkedin Live Series

Jan 25: 2021 KPMG Healthcare and Life Sciences Investment Outlook report release

Jan 27: Goodwin and KPMG JPM Symposium

Feb 2: 2021 KPMG Healthcare and Life Sciences Investment Outlook Virtual Event

We look forward to your feedback and participation. Until then, from all of us in deal advisory, stay safe, stay well, and get ready for a monumental transaction year in 2021.

Related content


KPMG Healthcare & Life Sciences Institute

Register to receive timely insights

Register to receive timely insights

About Healthcare & Life Sciences at KPMG

Our practice

Learn more


Our capabilities

Learn more


Meet our team

Learn more