5 trends defining the next wave of life sciences M&A

1. Deal activity is on the rise.

The life sciences industry is expected to experience a notable uptick in M&A activity in the coming years, setting the stage for robust growth after years of fluctuation.

More than a third (35%) of dealmakers say they anticipate more deal activity in the next year alone, survey data shows, with a vast majority of dealmakers (93%) expecting to make one or more deals in the next 24 months.

Biotech was the main focus for dealmakers last year, but West Monroe's polling suggests there is a growing interest in AI and data analytics platforms for drug research, which are now the leading targets for future acquisitions.

Oncology and immunology therapies, platform technologies including mRNA and CRISPR products, cell and gene therapies and biomanufacturing and advanced manufacturing technologies are also drawing investor interest.

Although most M&A activity takes place in North America, buyers are looking to EU-based assets as a way to sidestep tariffs imposed by the Trump administration last year. Other emerging hotspots include India, China and Japan, the survey highlights.

2. Policy complicates deals, but isn't slowing them down.

While policy changes and regulatory uncertainties can complicate M&A deals, they do not appear to be slowing deal activity. Drug pricing and trade policy have the greatest influence on life sciences M&A, followed by regulatory oversight and reimbursement rules, but companies are finding ways to adjust.

Just over half of the dealmakers surveyed say that Trump-era policies have had no impact on their dealmaking strategy, while 15% say tariffs have caused them to reconsider affected investment targets.

Of those surveyed, slightly more than half say regulatory uncertainty is the biggest barrier to growth, with financing pressures coming in close second.

Roughly a third of respondents expect Trump's "Big Beautiful Bill," which includes potential Medicaid cuts and drug rebate reforms, to dampen activity for high-cost specialty drugs. Less than a quarter think Trump's bill will boost investment activity.

The survey also reveals how life sciences M&A dealmakers view RFK Jr.'s Make America Healthy Again (MAHA) policy initiative. A third say MAHA will have no impact on the life sciences sector, while 29% view the movement positively and 15% negatively.

3. AI has become a core driver of value.

AI plays a role in an overwhelming majority of deals and is poised to drive even more M&A activity moving forward, survey data shows.

The deployment of AI is highest in clinical trials, patient recruitment and early R&D, with three-quarters of respondents reporting moderate or significant value from post-close AI investments. Survey results show that over a third (36%) say AI and data platforms for drug discovery and clinical trials are the most appealing technologies for acquisitions in the next two years.

Additionally, 1 in 5 respondents believes that AI-enabled drug discovery is the most promising area for disruption over the next two to three years.

4. Value creation is digital and cultural.

Investors are looking to modernization as a way to create value, improve efficiency and enhance scalability.

As shown in the survey, 3 out of 5 life sciences companies still use paper-based workflows to some extent. This significant operational gap presents potential investment opportunities for those who are well-equipped to quickly update and scale business operations.

Another way to create value, some say, is through the integration of organizational culture, but it can also be a reason why some deals falter.

When asked what contributes the most to value creation, more than a quarter of those surveyed said cultural integration, and yet, more than half ranked culture and integration as their biggest hurdle.

Cultural differences can exist at any level and can disrupt operations, but organizations that prioritize cultural integration throughout the M&A process increase their odds of having a successful and profitable M&A.

5. PE firms and companies are approaching deals differently.

Private equity firms and life sciences companies use M&A to grow, but they use differing strategies.

The top reasons PE firms want to combine or grow businesses are to remain competitive, enter new markets and create new investment platforms, the survey says.

Private equity firms are fast-paced, focusing on growing platforms through partial integration and then exiting the company as quickly as possible. This strategy is used to redeploy capital and capitalize on active buyer demand.

Partial integration was utilized in nearly half of PE firms' most recently completed transactions, data shows.

Life sciences companies, on the other hand, tend to prioritize long-term value and intellectual property ownership over speed. Nearly a third of respondents say that their most recent deals were fully integrated.

These companies primarily use M&A to acquire technology, expand into new markets and strengthen their R&D pipelines, the survey suggests.

Although these two types of dealmakers approach M&A deals differently, they both depend on digital systems, AI and the rapid creation of value. The buyers that can move the fastest and integrate successfully will be leaders in the next wave of life sciences M&A activity, West Monroe predicts.

Alivia Kaylor is a scientist and the senior site editor of Pharma Life Sciences.