M&A Activity Set To Increase In Africa’s Health Sector

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Written by Kevin Mwanza

Mumbai-based pharmaceutical major Lupin Ltd buyout of the remaining 40 percent equity stake in South Africa’s generic drug maker Pharma Dynamics at undisclosed amount last week shed light on other potential windfalls for Africa’s health-care investors.

According to the World Health Organization, sub-Sahara Africa accounts for nearly 12 percent of the world population, yet bears over a quarters of the global disease burden.

With improving economic activity and a bulging middle class in the region the demand for better health care by a youthful populace has created a ripe market for health sector investors. In many African countries, health is also grossly underfunded by the government.

“In Africa, healthcare mergers are driven by the need to simultaneously achieve economies of scale, skill, and scope in order to deliver more sustainable healthcare,” South Africa’s National Head of Healthcare Sandile Hlophe told KPMG.

An International Finance Corporation study estimates sub-Sahara Africa will require $25 to $30 billion in new investments in health in the next decade to meet growing demand.

That explains why the region has seen an increase in small scale mergers and acquisition in the health sector as investors wake up to the reality of the potential the sector has. Private equity (PE) firms have been particularly active in many of these deals in recent years.

Some of these mergers include South African listed Ascendis Health that has been on an acquisition spree in the last few month. Ascendi acquired a majority stake in The Scientific Group in October last year, just two month after acquiring six leading products from Arctic Healthcare.

UK-based private equity firm Aureos Capital has also invested nearly $10 million in East African medical facilities, while Acumen Fund hasinvest in the manufacture of consumables such as medical gauze and gloves in Kenya this year, according to Reuters.