The MENA Pharma Market: Getting Ready for M&A Activity

Preparing for M&A Activity

With continued and accelerating growth, the Middle East and North Africa (MENA) region has become a major player in the global pharmaceutical market. Increasing demand for healthcare services and a growing population have driven strong growth, and a focus on local investment and development has accelerated the industry’s maturation.

As the sector continues to mature, it is highly likely—based on the patterns seen in other markets—that we will soon see an increase in merger and acquisition (M&A) activities. That means that every company in the region should be taking steps now to prepare for the possibility of being affected by future M&A activity.

Rapid Growth Sets the Stage for Increased M&A Activity

The pharmaceutical industry in the MENA region has experienced remarkable growth in recent years, outpacing many global markets. According to industry reports, the MENA pharmaceutical market has witnessed an average annual growth rate of approximately 7-9% over the past decade. With a market size exceeding USD 40 billion, according to industry research firms such as IQVIA and Grand View Research, the MENA region stands as a significant player in the global pharmaceutical landscape.

This growth can be attributed to several factors, including the rising prevalence of chronic diseases such as diabetes, cardiovascular disorders, and cancer. Additionally, the expanding middle-class population, coupled with increasing healthcare expenditures and favorable government initiatives, has fueled demand for innovative healthcare solutions and pharmaceutical products across the region. Furthermore, the shift towards generic medicines and the emergence of local pharmaceutical manufacturing capabilities have contributed to the market’s expansion, offering cost-effective treatment options and enhancing accessibility to essential medications for the region’s population.

Academic research has extensively explored the patterns of M&A growth following periods of rapid market expansion, shedding light on the dynamics observed in various industries globally. Studies by renowned scholars such as Professor Steven N. Kaplan from the University of Chicago Booth School of Business and Professor Bernardo Bortolotti from the University of Turin have delved into the relationship between market maturity and M&A activity, providing valuable insights applicable to the MENA pharmaceutical sector.

Historically, periods of rapid growth in a market, such as the MENA pharmaceutical industry, are often accompanied by heightened M&A activity as companies seek to capitalize on emerging opportunities, consolidate market share, and drive strategic growth initiatives. Kaplan and Bortolotti’s research suggests that M&A transactions tend to increase as markets mature and experience intensified competition and evolving regulatory landscapes. As markets mature, companies become more receptive to mergers and acquisitions as a means to achieve economies of scale, enhance operational efficiencies, and diversify their product portfolios.

In the context of the MENA pharmaceutical market, the surge in M&A activity can be seen as an opportunity for industry players to strengthen their competitive position and expand their geographic footprint. As the market matures and regulatory frameworks evolve, M&A transactions can serve as strategic tools for companies to navigate regulatory complexities, streamline operations, and accelerate innovation, thereby extending their growth trajectory.

Prepare for M&A Events

With the possibility of increased M&A activity on the horizon, every pharmaceutical company operating in the MENA region has the power to be proactive in preparing for potential M&A events.

One of the most critical steps for any pharmaceutical company preparing for potential M&A events is to ensure regulatory compliance and have all necessary filings in order. This is particularly important as regulatory scrutiny is heightened during M&A transactions. Companies with robust compliance frameworks are better positioned to navigate regulatory challenges seamlessly, which can significantly impact their operations and value.

Moreover, a well-documented quality management system (QMS) is essential for demonstrating operational excellence and adherence to international quality standards. Implementing standardized processes and procedures enhances efficiency and instills confidence in potential acquirers regarding the company’s commitment to quality and safety.

Beyond investing in regulatory and quality management systems, ensuring that the company’s files and document repositories are in order is a simple but important step. Centralizing and categorizing documents related to manufacturing processes, product registrations, intellectual property rights, and financial records increases a company’s value and negotiating position in an environment with increased M&A activity.

Invest in Technology and Systems

Investments in computer-based quality, document, and regulatory management systems are not just a good idea but a necessity when a period of increased M&A activity is likely. These systems, such as Scigeniq’s Quality, Document, and Regulatory Management Systems, automate and streamline critical processes and documentation, ensuring data integrity, version control, and compliance with regulatory requirements. Cloud-based platforms, in particular, offer scalability, accessibility, and real-time collaboration, facilitating seamless integration of acquired entities and harmonizing diverse systems and processes. Such technology can provide operational efficiency and agility, enhancing a company’s readiness for M&A activity.

By leveraging technology, a pharmaceutical company in MENA can obtain the benefits of increased operational efficiency, agility, and resilience today, whether an M&A event is in their future or not. Robust technological infrastructure enables companies to adapt quickly to regulatory changes, mitigate risks, and capitalize on market opportunities, ultimately driving sustainable growth and value creation. However, if they are targeted for acquisition or become an acquirer, those investments can position them as ready for M&A activity and directly increase their value and negotiating power.

There is Nothing Wrong with Being Prepared

As the MENA pharmaceutical industry continues to evolve, increasing M&A activity is likely and perhaps inevitable. Whether M&A is part of a company’s strategy or not, it will impact the environment in which they operate. This underscores the need for all companies to be prepared for potential changes, regardless of their strategic plans.

Focusing on a future merger or acquisition and gearing a company’s activities toward that event is almost never a good strategy; it can skew priorities and create a short-term perspective. But that does not mean it is okay not to be prepared for changes in the market.

Pharmaceutical companies in the region should prepare for potential M&A events by ensuring regulatory compliance, implementing robust quality management systems, and organizing documentation effectively. These steps make sense in any operating environment. Similarly, investments in technology solutions are pivotal in enhancing operational efficiency and can enhance M&A readiness.

The key is to be ready to navigate a changing market from a position of strength and to capitalize on the transformative opportunities presented by the evolving landscape of the MENA pharmaceutical market. If you need help preparing your company through the implementation of technology, let us know. We can talk about your requirements and help you understand the best path forward.