July 7, 2022
What will healthcare look like in 2050? Will life expectancy be significantly longer? Will there be a slow, predictable shifting of the burden of disease, or will this accelerate in radical and surprising ways? Will the globalised world mean we experience similar disease patterns and, importantly, will the sector be able to apply nimble and agile technologies to address the needs? A new report by Translink Corporate Finance in partnership with The Institute for Futures Research at Stellenbosch Business School (IFR) explores the possible futures for healthcare by 2050 and the impacts on M&A.
Futures thinking has been identified as a critical strategic priority for businesses to anticipate change, and better prepare for it. Professor Andre Roux, Head of Futures Studies Programmes at Stellenbosch Business School says, “By analysing trends over time, we can at least survive, but more importantly, even thrive in scenarios that may arise in the future”.
For industry players, 28 years into the future is not an inconceivable time horizon. M&A activity for healthcare companies could be significantly influenced by different scenarios by the year 2050, based on two key scenario-shaping factors that were revealed during the cross-impact analysis process undertaken by the authors of the report: (1) The changing burden of disease and (2) New technologies changing existing processes. According to Jens Borelli-Kjær, Partner at Translink in Denmark and co-head of Translink Healthcare Group, “Wealth development will have a material impact on healthcare and the changing burden of disease and on “consumption” of healthcare services. In addition, growing threats like the increasing mental health issues, especially among young people, will be one to watch. All the providers of healthcare services will be impacted by these changing demands.”
Rebecca Zhu, Managing Director at Translink Corporate Finance China, and co-head of Translink Healthcare Group, says, “We are seeing the digital health revolution creating crucial regulatory, compliance and legal challenges. Consumers don’t seem to be wholly convinced about interacting with healthcare providers through digital-only touch points. So, while the future will likely be influenced by multiple factors, societal adoption will be amongst them.”
The TOMORROW: 2050 Alternative Futures for Healthcare Report considers four potential futures. Here’s a synopsis of each scenario and the thought-provoking impacts on M&A:
Depicted as a luxury yacht on calm seas, in this future, the burden of disease would shift slowly, allowing for the proactive and efficient development and adoption of technologies. Global synergies abound and there would be significant emphasis on research and development (R&D). The sector would have time to refine an upsurge in treatments and technologies.
We would see incumbents (the large, international healthcare firms) enhancing their existing expertise with huge investment in R&D. Natural oligopolies would likely develop due to the persistently high barriers to entry. Governments could take some steps to influence organisations in the sector to secure the best options for their people. A rising global middle class would increase demand for advanced healthcare solutions, and the markets may well move to the South – predominantly Asia and to some extent to Africa south of Sahara.
What this scenario means for M&A:
M&A would be driven by incumbents as they invest in technology companies to acquire new capabilities, cement oligopolies and prevent new players from entering the market. ‘Deep’ R&D would mean ample opportunity to find synergies and streamline production efficiencies. Incumbents would seek organisations that enhance their ability to offer tech-led self-diagnosis and self-treatment options. M&A would also enable incumbents to access new markets, with horizontal, vertical, and regional mergers common.
In this scenario, the world would experience ‘turbulent waters’ as the healthcare sector is rocked by a rapidly changing burden of disease. Regular outbreaks of new diseases would prompt proactive, efficient technological development and adoption. Globalised disease patterns could force healthcare-driven migration as people may move to escape disease hot-spots or seek better care. Borelli-Kjær says, “We would see localised virtual healthcare come to the fore in some countries as digital connectivity advances, whilst availability (i.e., supply) of traditional healthcare services has not been able to keep up with the growth in population size and wealth, i.e., with demand. A mobile middle class would demand advanced healthcare and spread diseases faster; and we would likely see an increase in lifestyle-related diseases. Stress and anxiety-related medical diagnoses would also be on the rise, especially amongst young people. Public and private healthcare provider organisations would be under pressure.”
In this future, incumbents would invest heavily in new technologies, but new players could make inroads as well, with transdisciplinary teams coming to the fore. New entrants could come from non-traditional places and industries, surprising existing players. Concern about the shifting burden of disease would drive more government intervention.
What this scenario means for M&A:
Described by Borelli-Kjær as the ‘wild west’, in this future, M&A deals would involve global players across all levels of the supply chain and new tech-born ecosystems. M&A ‘silos’ would be swept away, with cross-pollination taking place between industries; new alliances would form and new market configurations emerge. “Early movers would have an edge, and we would see more international joint ventures and agreements between tech companies and traditional players. Government M&A-related regulation would be based on expedience – specifically, how to achieve the right care for emerging diseases,” explains Borelli-Kjær.
Likened to a windsurfer who uses simple technology to navigate mostly calm waters that are well known, in this scenario, the healthcare sector would apply existing technologies to attend to a slow and gradual shift in the burden of disease
The burden of disease would shift slowly, and the development and adoption of technologies would also be gradual. Disease patterns would replicate those experienced in the developed world for the last 100 years, so healthcare providers could predict their evolution. Worryingly however, there could be a growing resistance to antibiotics, resulting in certain ‘old’ diseases making a comeback.
In terms of technology: compliance constraints could hamper development, low and delayed returns on investment would frustrate investors, and resistance from stakeholder groups on ethical issues would be a deterrent for both investors and scientists. Governments would likely seek policies that entice healthcare providers to their shores. Most of the global markets would move to the South (Asia, especially), and we would see a growing middle class in developing countries whose demand for healthcare would not be met due to sluggish tech innovation.
What this scenario means for M&A:
M&A activity would be slow. Zhu explains, “The implications for M&A activity would be rather limited. The incumbent healthcare companies would therefore tend to focus on grabbing existing market share. Companies in healthcare tech would seek to maximise their product or service application – perhaps by entering into new markets in less developed regions or where the incumbent has no footprint. But such acquisitions would face severe resistance from the government and may be classified as monopolies.”
Zhu continues, “In this scenario, another way for healthcare companies to reinforce influence in the existing market would be to focus on key strengths. We could see the large traditional healthcare companies splitting their non-core business or low profit margin business to optimise their cost structure and investment portfolio.” We can expect to see a rise in consumer healthcare groups too.
As dire as the analogy suggests, this future combines a rapidly changing burden of disease with the slow development and adoption of technologies. New diseases would be detected regularly, with most societies suffering from similar afflictions. This scenario would see a global dearth of scientists and technology experts, and compliance constraints would further halt innovation. We would see major migration as people make more concentrated moves to a smaller selection of countries with good healthcare. A mobile middle class would spread diseases faster, against a backdrop of insufficient tech-led initiatives to address their increasing healthcare issues.
Technological innovation could be additionally hampered by low and delayed returns on investment, pressure to make IP available, outdated regulation, and a lack of capacity and expertise on fast developing new diseases. This would mean an ad-hoc approach is adopted. Incumbents would engage in opportunistic R&D; however, they would be behind the curve and lose out to nimbler, often more technologically advanced, new players. Government intervention would be high.
What this scenario means for M&A:
M&A deals could be regularly derailed by tedious compliance requirements. Some organisations would enter into mismatched or miscalculated M&As. We could also see M&A further fuelling elitism as players would see pockets of opportunity in certain areas only – thus heightening the growing global inequality.
OUR PARTNER IN ANY POSSIBLE FUTURE(S)
Translink’s TOMORROW: 2050 future mapping series demonstrates our deep commitment to being a partner that our clients can rely on, now and in the future(s). The series celebrates our 50th anniversary, commemorating five decades of successful dealmaking. In the healthcare sector, Translink has an industry expert group of 21 individuals across the world. Many have CXO, business and management experience. The fact that most people have worked in the industry truly sets the team apart, enabling them to offer first-hand experience. It also means the team has an extensive global network, with excellent relationships with players around the world. When it comes to getting the deal done, this makes all the difference – whatever the future(s) may hold.
To read the full healthcare report and the other sector reports in the TOMORROW: 2050 series, visit https://www.translinkcf.com/50th-anniversary/