The International Association of Young Lawyers (“AIJA”) is a global network of legal professionals under the age of 45, connecting members in over 90 countries and fostering collaboration across borders. At its December half-year conference in Hamburg, Paul Breen joined an insightful panel on “Navigating the Future of M&A in Healthcare and Technology,” exploring how innovation and regulation are reshaping dealmaking in these sectors.
Regulatory Environment
M&A in healthcare and technology is increasingly shaped by regulation. For companies and investors, this means regulatory considerations are no longer a post‑closing issue—they are central to how deals are priced, structured, and executed.
To give a brief summary of recent UK initiatives, the Medicines and Healthcare products Regulatory Agency (MHRA) introduced the International Recognition Procedure (IRP) in January 2024. This allows faster authorisation of new medicines by recognising approvals from trusted regulators such as the FDA, EMA, Japan’s PMDA, and Health Canada. This initiative signals a clear commitment to accelerating innovation pipelines and reducing regulatory friction for emerging products. Alongside this, the UK continues to strengthen international partnerships, underscoring the global nature of regulatory alignment.
In parallel, the first major overhaul of the medical device regime has begun, with new Post Market Surveillance regulations requiring more robust safety monitoring and clearer manufacturer obligations, helping build confidence in the UK as a high quality regulatory environment for med-tech innovation. In addition, the UK Government has also launched a wider UK Life Sciences Sector Plan, which commits to a faster, more agile MHRA, expanded international regulatory reliance mechanisms, and clearer market access routes to help position the UK as Europe’s leading life sciences economy by 2030.
Technology deals face parallel challenges. General Data Protection Regulation (GDPR) compliance and data protection laws are critical in cross‑border transactions, while competition law requires careful monitoring of Competition and Markets authority (CMA) risks and National Security and Investment Act 2021 (NSIA) filing triggers should also be considered.
The absence of a unified global artificial intelligence (AI) regulatory framework adds further complexity, leaving parties to navigate fragmented national rules that complicate structuring and diligence.
Evolving Approaches to Due Diligence
Due diligence in these sectors is uniquely demanding. Intellectual property ownership, regulatory compliance, clinical data integrity (including compliance with data transparency and disclosure obligations), contractual liabilities, and cybersecurity are all high‑risk areas. Buyers are increasingly seeking broader warranties and indemnities, particularly around Intellectual property (IP), regulatory compliance and AI.
Warranty & Indemnity (W&I) insurance is widely used, but exclusions remain significant, particularly around IP ownership, often requiring sellers to stand behind warranties personally. To reduce risk, early engagement with brokers and underwriters is essential to negotiating and minimising exclusions.
Innovative Deal Structuring
Structuring transactions requires flexibility and is about mitigating risk. Share sales demands rigorous diligence with warranties and indemnities heavily negotiated to allocate post-completion risk, while asset deals are often used to isolate riskier IP portfolios or carve out legacy assets. The chosen structure will be heavily driven by tax considerations.
A growing trend is hybrid structures, such as carving out legacy assets whilst spinning off IP and key personnel into a clean NewCo, offering flexibility and control.
To address uncertainty, tools like earn-outs (for performance-linked milestones such as patent approvals or clinical trials), escrow arrangements (holding part of the purchase price until regulatory conditions are met, for example), and split signing and completion (with longstop dates for pending approvals) are increasingly common.
Beyond tradition M&A, licencing and innovation partnerships are gaining traction as alternatives, particularly for cross-border collaborations.
Transfer of regulatory approvals
A common focus area when undertaking regulatory focussed due diligence of a life sciences target will be to assess the scope of the regulatory approvals and crucially, the corporate structures in which those are held. For instance, it is not uncommon for certain regulatory approvals to be held within different operating entities within the target business. If some of those entities fall outside the transaction scope, then it can materially impact the transaction value because the buyer would not necessarily acquire all material operating licences on completion.
Transition planning
For certain transactions in the life sciences sector, regulatory alignment with completion timescales are essential. For instance, innovator pharmaceutical companies or contract research organisations (CRO) involved in clinical trials will need to co-ordinate appropriate notifications to competent regulatory authorities to ensure a streamlined continuity of clinical trials post-completion and thereby safeguarding patient welfare. Similar transition management considerations will apply to companies engaged in the manufacture or supply of active pharmaceutical ingredients (API) or to CROs providing outsourced clinical research activities.
Future Outlook
The UK life sciences industry faces a number of challenges ranging from funding pressures, regulatory alignment with the EU as well as an evolving regulatory burden. Yet opportunities remain: strong talent clusters, international partnerships, and the emergence of closer alignment with the EU in areas such as clinical trials and medical devices. These positive developments position the UK as a competitive hub for innovation. AI integration and the acceleration and increased deployment of digital health innovation has the potential to incentivise an increase in transaction volume. Similarly in the technology sector, cautious optimism exists with expectations for a steady flow of deals driven primarily by strategic integrations of AI and the "buy-and-build" strategies of private equity firms – in the face of the persisting economic and political uncertainties, the tech sector’s intrinsic requirement for innovation continues to fuel M&A activity.
Key Takeaways for Companies in advance of any sale:
- Engage early with regulatory to minimise delays;
- Audit IP and review key contracts;
- Scrutinise data quality and strengthen data security practices;
- Review the scope of regulatory approvals within scope and consider the impact of the corporate entities holding those approvals; and
- Consider transition planning in the context of applicable regulatory notifications
Proactive planning helps all parties reduce risk, protect value, and structure deals that deliver.
How Brodies can help
If you would like to discuss anything raised in this blog in more detail, please get in touch with one of the Brodies team below, or, your usual Brodies contact who will be happy to assist.
