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Healthcare Venture Capital Will Continue to Fuel M&A Activity

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This article was originally published on ETFTrends.com.

Merger and acquisitions (M&A) activity within the healthcare industry heightened last year, according to recent research data and this could feed into gains for M&A and healthcare-focused ETFs for traders sensing an opportunity.

“The U.S. healthcare market saw a 14.4 percent increase in mergers and acquisitions from 2017-2018, fueled by soaring domestic venture capital investment – an all-time high of $130.9 billion invested in U.S.-based startups in 2018 alone,” a press release by Sage Growth Partners said. “Compounding the pace and complexity of deal flow are sweeping industry trends ranging from managing and measuring health outcomes to reducing the overall cost of care.”

Furthermore, a Recycle Intelligence report noted that healthcare “saw a 14.4 percent increase in mergers and acquisition activity from 2017 to 2018, data from PricewaterhouseCoopers revealed. In total, there were 1,182 M&A deals in 2018, and M&A activity has remained firm in 2019, with deal volume exceeding 250 deals in the first three quarters.”

"Business opportunities in healthcare today are driven by two key factors – the industry's widespread waste and inefficiencies, and public and private sector mandates to reduce costs while increasing health outcomes," said Dan D'Orazio, SGP's CEO. "As a result, there is an abundance of potential partners and investment capital. It's not surprising that investors and CEOs don't completely see eye to eye on the perceived benefits of venture capital investment. However, they will have to find a way to successfully overlap their needs to benefit from the most valuable resource in their arsenal – the people."

For leverage-hungry traders, this could bode well for the Direxion Daily Healthcare Bull 3X ETF (CURE). More conservative ETF investors can look for opportunities in the Health Care Select Sector SPDR ETF (XLV) , Vanguard Health Care ETF (VHT) and the iShares US Medical Devices ETF (IHI) .

Opportunities in the M&A industry also exist within the IQ Merger Arbitrage ETF (NYSEArca: MNA) . MNA seeks investment results that correspond generally to the price and yield performance of its underlying index, the IQ Merger Arbitrage Index, which seeks to employ a systematic investment process designed to identify opportunities in companies whose equity securities trade in developed markets, including the U.S., and which are involved in announced mergers, acquisitions and other buyout-related transactions.

The fund surpassed $1 billion in assets under management (AUM) earlier this year as it built off last year’s M&A strength. In 2019, mergers and acquisitions were abound in various sectors as the historic bull market saw a rise in such activity, particularly from the technology sector that fueled much of the growth.

For more market trends, visit ETFTrends.com.

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