It's been nine months since the COVID-19 outbreak sent shockwaves through the global economy. While the markets have recovered somewhat and early losses have been reversed, many industries continue to face deep financial hardship. Unprecedented in its global reach and impact, the pandemic has wiped out large swathes of the global economy. More resilient to economic downturns compared to cyclical industries, the pharmaceutical sector was not as badly hit, offering protection to investors in times of heightened uncertainty. Still, the destructive impact was felt. Some healthcare sectors were sheltered from the economic shock brought by the virus outbreak, but many segments of the health and social care system felt the damaging effect much in the same way that it has been for a lot of cyclical sectors. As the health crisis placed hospitals in the spotlight, the healthcare sector found itself in a perfect storm. On one side, revenue was affected as all healthcare deemed nonessential was postponed. On the other side, healthcare providers faced growing cost pressure as wages and supply cost increased. In addition to the supply chain, workforce and financial disruption, the healthcare sector started to face longer-term challenges, including shifts in patient behaviour and demand, as well as adjustments to operating models required to better serve and manage populations in the post-COVID-19 world. The impact of the virus outbreak and all it brought was multi-layered. The first-order impact of lockdowns and quarantine surfaced as business deterioration across the healthcare services spectrum — although to a varying degree. The economic fallout from COVID-19 was most evident among provider-based specialities, the elective segments of provider practice management, and social care settings, which faced the challenge of an immediate drop in private referrals coupled with the requirement to potentially accept patients with COVID-19 from hospitals. And any time there is a disruption to business operations, there is a disruption in M&A activity that follows — and this time was no different. Markets quickly tightened up with most processes either put on hold or delayed until uncertainty subdued and more clarity about a future recovery was restored. Indeed, as the country opened up and businesses resumed operations, more buyers engaged in deal-making activity, unlocking a massive backlog of the build-up of interrupted deals. As we approach the year-end, this pent up demand is expected to lead to high transaction volume and gradual deal-making recovery. The latest numbers on M&A activity released by ONS support these findings documenting subdued activity until June, with a rebound in July and August.
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