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Since health is considered an utterly precious feature, the health care industry is one of the world’s largest and fastest growing sectors. Nevertheless, anticipated staggering growth and increasing uncertainties regarding patent protection exert pressure on the parties involved. The obligation for large pharmaceutical companies to develop, on an annual basis, a new “blockbuster” drug is often not possible. Other sectors, such as hospitals, hit with high debt and limited earnings growth may become targets for leveraged buyouts.

Thus, large firms are merging and acquiring others and contractual relations and alliances within the industry intensify. Since the health care market has so many players, it is difficult to record merger activities between two specific subsectors. However, a trend towards consolidation is unmistakable. Both vertically and horizontally, consolidation is taking place across the industry to respond to declining demand, selective contracting and greater price sensitivity.

The innovative biotechnology subsector has become increasingly consolidated within the past decade; without doubt a result of merger activity. Small biotech companies, usually cash-starved because of a lack of in-line products, join forces for financial survival. The valuation of a biotech company needs special experience to handle the specifics of the drug research and development, e.g. how to incorporate the clinical phases in the valuation process.