Healthcare and medical communications have long been favoured sectors for investors. Unlike many of the things we purchase and consume, medicines and healthcare products are often necessities, and thus far more recession-proof than those products representing discretionary spend.
Combine the fact that pharmaceutical firms have big (and global) marketing budgets in recognition of the specialised skillsets and regulatory knowledge necessary to market in this vertical, and you naturally have a subset of the marketing communications industry that is very attractive to those looking to invest.
Over the last 30 years we’ve seen increasing consolidation of agencies within this sector. Following the introduction of stricter regulations in the early 2000s, agencies moved away from traditional medicine advertising and PR, instead focusing more on medical education, targeting healthcare practitioners and ensuring compliance. During this period, agencies and acquirers became more discerning in what they were respectively providing and acquiring.
In more recent years we have seen a sharp uptick in technological advances in data analytics and digital marketing, meaning agencies that provide clients with measurable campaign data and insight have become of great interest, and we’re now seeing agencies investing time into understanding how AI techniques can be used to best effect in a marketing context, not only to become more efficient internally, but also to benefit their clients. Agencies that develop proprietary techniques and IP to exploit their advantage are top of acquirers’ wish lists.
We’ve witnessed an evolution from the traditional marketing of drug therapies in a rarefied environment to a highly sophisticated, technology-driven marketing approach, with fully tracked campaigns being optimised in real time to deliver true ROI.
It’s obvious why healthcare and life sciences marketing businesses are so attractive to investors and it’s no longer an area dominated by marcoms groups. There’s the PE-backed healthcare management consultancies, such as Blue Matter and Trinity, healthcare service providers (CROs) including Eversana and IQVIA, and healthcare communications groups, including OPEN Health, Real Chemistry and Spectrum Science. There’s no shortage of acquirers for quality assets.
That said, acquirers’ focus continually shifts as marketing skills develop and the hottest new thing today can quickly become tomorrow’s old hat. When selling an agency, the trick is not to leave it too late and to sell while still in the growth phase. This is particularly pertinent when selling into a private equity-backed roll-up that is looking to exit in the near term (three to five years) as it is extremely growth focused. That’s not to say specialist expertise is not of interest, simply that if the roll-up’s own exit is near term, then maintaining the ‘hockey-stick’ P&L graph is vitally important to them.
While all healthcare disciplines are driven by growth, those that have longer-term ownership profiles (for example publicly listed, large PE or family office backed) tend to have more of an eye on particular skills an agency brings and how it fills gaps in their armoury. The drive here is to get through procurement and onto a roster to acquire significant clients, drive long-term retention and cross-sell offerings once in the door. Thus, being able to cover as broad a healthcare marketing church as possible is very important to them.
In conclusion, the last few decades have seen healthcare and pharma marketing become increasingly sophisticated with a plethora of companies and groups developing and offering these services. It remains one of the hottest disciplines for M&A within the marketing sector and, despite current micro- and macro-economic and global concerns, we are not seeing any slowdown in interest in the sector, with those agencies of scale and specialist disciplines being of most interest.
This thought leadership piece appeared in the May edition of PME. Read the full issue here.
