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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Gilead Sciences, Inc.    GILD

GILEAD SCIENCES, INC.

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Tech, healthcare mega deals boost virus-stricken M&A market

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09/15/2020 | 09:45am EDT
FILE PHOTO: Gilead Sciences Inc pharmaceutical company in California, U.S.

After adapting to working from home in the COVID-19 pandemic, cash-rich technology and healthcare companies have now mastered dealmaking from home.

This week, Nvidia Corp unveiled a $40 billion agreement to acquire chip maker Arm Ltd from SoftBank Group Corp, while Gilead Sciences Inc inked a $21 billion deal for biotech company Immunomedics Inc.

They are the latest examples of companies whose business is minimally affected by, or in some cases benefiting from, the pandemic's financial fallout and which are embarking on big acquisitions.

"They've largely learned to do work from home for their own business, and now it's about strategic deployment of capital," said Tom Miles, co-head of mergers and acquisitions (M&A) for the Americas at Morgan Stanley.

To be sure, U.S. M&A volume so far in 2020 is down nearly 50% on the same period in 2019, Refinitiv data showed. But of the $715.9 billion spent on acquisitions this year, 41% has gone towards either a technology or healthcare transaction.

Tech deals account for 27% of deal volume, the highest level for this point in a year in the last 23 years, and are up 37% year-on-year.

"August was the busiest month ever for us. For tech and healthcare, the regular cadence of M&A is coming back," said Marc-Anthony Hourihan, global co-head of M&A at UBS.

Technology and healthcare have historically the most active M&A sectors. But many companies in this sector have also fared better in the downturn, either because their offerings are accelerating the transition to digital workplaces and big data, or because they are benefiting from increased investment and spending on healthcare.

As a result, many of the companies are flush with cash, and if they also want to borrow to do deals, they can do so at very low interest rates.

Some smaller companies in these sectors have also emerged as popular targets for special purpose acquisition companies (SPACs), which have already spent a record sum to acquire companies to take public this year. The largest SPAC deal ever was July's $11 billion purchase of healthcare services firm MultiPlan Inc by Churchill Capital Corp III.

What is more, technology and healthcare companies can be easier to carry out due diligence on remotely in the pandemic, compared to industries that have factories or stores, dealmakers said.

"As much as any sector, diligence can be completed entirely virtually (for healthcare companies) with limited necessity for on-site visits," said Cary Kochman, global co-head of M&A at Citigroup.

By Joshua Franklin

Stocks mentioned in the article
ChangeLast1st jan.
CITIGROUP INC. -0.40% 42.02 Delayed Quote.-47.40%
GILEAD SCIENCES, INC. 0.00% 62.25 Delayed Quote.-4.20%
IMMUNOMEDICS, INC. 0.07% 85.36 Delayed Quote.303.40%
MORGAN STANLEY 0.92% 47.04 Delayed Quote.-7.98%
NVIDIA CORPORATION 4.26% 514.95 Delayed Quote.118.85%
SOFTBANK GROUP CORP. 1.26% 6164 End-of-day quote.29.60%
UBS GROUP AG -2.97% 9.678 Delayed Quote.-20.83%
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Financials (USD)
Sales 2020 24 269 M - -
Net income 2020 2 423 M - -
Net Debt 2020 3 137 M - -
P/E ratio 2020 34,0x
Yield 2020 4,31%
Capitalization 78 044 M 78 044 M -
EV / Sales 2020 3,35x
EV / Sales 2021 3,31x
Nbr of Employees 11 800
Free-Float 99,6%
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Mean consensus OUTPERFORM
Number of Analysts 29
Average target price 78,79 $
Last Close Price 62,25 $
Spread / Highest target 68,7%
Spread / Average Target 26,6%
Spread / Lowest Target -0,40%
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Managers
NameTitle
Daniel P. O'Day Chairman & Chief Executive Officer
Andrew D. Dickinson Chief Financial Officer
William A. Lee Executive Vice President-Research
Merdad V. Parsey Chief Medical Officer
George Pratt Shultz Director-Emeritus
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