Contrary to all expectations, last year was a record year for transactions in the M&A and real estate sectors. In total, M&A deals worth USD 5.9 trillion were completed worldwide.1 This significantly exceeded 2007, the strongest year to date in this area (USD 4.55 trillion).2 In the field of real estate investment, 2021 was also another record year in Germany. According to real estate investor CBRE, EUR 111 billion worth of real estate was purchased in Germany, which is 40% more than in 2020.3 In a large number of these transactions, Warranty & Indemnity Insurance (W&I insurance) was purchased, showing the product is now an integral part of the acquisition process, especially in the context of bidding processes.
In this article, we highlight three sectors in M&A that have seen significant growth over the past year: (i) healthcare, (ii) utilities, and (iii) mail order. The reason for the increased demand in these sectors is likely to have been the Covid-19 pandemic. With this in mind, recent developments in the insured real estate transactions sector will be briefly explained against the backdrop of the Covid-19 pandemic.
1. Healtcare sector
Unsurprisingly, the Covid-19 pandemic was a strong driver for companies in the pharmaceutical sector (e.g. vaccine manufacturers and their suppliers) and medical devices/technology sector (e.g. test manufacturers, laboratory utensil manufacturers, medical software and laboratory diagnostics).
Within the context of these transactions, a particular focus of our review was on the sustainability of such investments. Clinical and biotechnological products that form the basis for novel mRNA vaccines are expected to remain in high demand due to advancing research in this area. On the other hand, demand for PCR and antigen testing is decreasing as new Covid-19 infections decline. The high demand for syringes, cooling facilities, etc., as part of the global Covid-19 vaccination campaign is also expected to level off in the foreseeable future.
As well as the importance of the quality of the clinical and biotechnological products, an increased focus in these transactions has been on the reliability of supplies. One of the lessons learned from early on in the Covid-19 pandemic was increased bottlenecks in what had previously been considered reliable supply chains. As a result, many companies broke this thus far prevailing trend and have, where possible, significantly ramped up their inventories. The problems that have occurred as a result of this, have highlighted that the historic reluctance of W&I insurers to insure losses arising out of inventory levels and quality, is appropriate.
