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Stock Strategist

A Shift in Health-Care M&A Activity

Recent deals have been driven more by tax strategies than therapeutic synergies.

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Traditionally, mergers and acquisitions in the health-care sector involve companies seeking to better leverage their existing infrastructure. Companies tend to stick to therapeutic areas they're already in, where they have a sales force and relationships with physicians. More recently, however, we've seen companies create value by making tax-driven deals--either doing a tax inversion (in which a firm acquires a company in a lower-taxed country and then re-incorporates to that country) or buying overseas companies facing higher tax rates and moving those acquisitions to their home base.

To build an understanding of what the rest of 2014 might hold for M&A activity in health care, I recently talked with Morningstar health-care analysts Damien Conover, David Krempa, and Michael Waterhouse on May 31. Our discussion has been edited for clarity and length.

Basili Alukos does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.