9 March 2020

COVID-19: Impact on opportunities in the China health sector

Andrew Huntley, Anthony Siu

In the first trading week after the outbreak of the novel coronavirus (COVID-19), health sector performance in China’s capital market was remarkably strong. We look here at long-term impacts on the sector in China, and where the M&A and Private Equity opportunities may lie.

The BDA global Health Sector team has investigated these topics and would like to share our latest findings with you in our latest report.

Executive Summary:

  • COVID-19‘s impact on the global economy is far beyond SARS, with almost 12x confirmed cases globally to date and stricter quarantine measures. While the epidemic in China shows signs of improvement, the outbreak has spread to other parts of the world. We expect the economy in China to rebound strongly in the second half of this year, but the extent of the recovery will depend on the impact of the outbreak on the global economy
  • We expect the outbreak to have a positive effect on the healthcare sector development in China. While SARS’ impact on the sector was moderate, we believe COVID-19 will have a longer-term impact, with certain sub-sectors benefiting from favorable government policies and increased private and public health investments
  • The preventative, diagnostic and therapeutic solutions for COVID-19 generate explosive short-term demand for related medical products. While the demand spike is temporary, we expect some medical products to experience a transformation to long-term increased demand
  • COVID-19 has drastically raised people’s health awareness. It will raise both public and private health spending, and we expect the following subsectors to benefit, generating fundraising and buyout opportunities:
    • Vaccines, medical robots, IVD, ICU equipment & devices, online medical consultation, home-based medical devices and OTC medicine
  • Healthcare has been a hot spot for PE investments in recent years. We expect industry consolidation to accelerate, creating ample opportunities for both industry players and PE investors alike
  • We believe that COVID-19 does not change the “principles” of cross-border M&A in China:
    • Outbound deals focus on the acquisition of international brands, products and technology
    • Inbound deals focus on entering and capturing markets with strong demand and growth potential
  • Overall, COVID-19 outbreak is an opportunity rather than a crisis for capable private equity health investors, especially in certain sub-sectors

Download the full report

Contact BDA Healthcare team, China

About BDA Partners

BDA Partners is the global investment banking advisor for Asia. We are a premium provider of Asia-related advice to sophisticated clients globally, with over 24 years’ experience advising on cross-border M&A, capital raising, and financial restructuring. We provide global reach with our teams in New York and London, and true regional depth through our seven Asian offices in Mumbai, Singapore, Ho Chi Minh City, Hong Kong, Shanghai, Seoul and Tokyo. BDA has deep expertise in the Chemicals, Consumer & Retail, Health, Industrials, Services and Technology sectors. We work relentlessly to earn our clients’ trust by delivering insightful advice and outstanding outcomes.

BDA Partners has strategic partnerships with William Blair, a premier global investment banking business, and with DBJ (Development Bank of Japan), a Japanese government-owned bank with US$150bn of assets.

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