Axios Pro: Health Tech Deals

November 17, 2022

Axios Pro Exclusive Content

Happy Friday Eve, Health Tech readers!

🩸 Situational awareness: Elizabeth Holmes will learn her punishment tomorrow for defrauding investors in her failed blood-testing company, Theranos.

1 big thing: Cloudy, with a chance of pain

Four panelists sitting on chairs on a blue backlit stage

Speaking at the Berkeley Forum last week were Rachel Proffitt, left, Steve Lipin, Ed Batts and Brittany Skoda. Photo: Michael Flaherty/Axios

Getting a corporate deal done in the current climate isn't impossible. But it will require patience, creativity and some banking jiu-jitsu, a panel of advisers said last week at the Berkeley Forum on Corporate Governance, Axios' Michael Flaherty writes.

Why it matters: Deal volumes dropped 55% in Q3, meaning options for some struggling companies to survive are dwindling.

Yes, but: Opportunistic buyers are dusting off target sheets and preparing to scope out cash-heavy, lending-light candidates.

  • For now, uncertainty is keeping them at bay, said the panelists, who gathered in San Francisco with a roomful of mostly deal lawyers.
  • "Investors keep waiting for another shoe to drop," said panelist Brittany Skoda, Morgan Stanley's global head of software banking. She said they're asking if something is missing, and if it's going to get worse. "It feels increasingly that the answer to that question is yes."
  • She added that the big question for the software industry is where IT budgets are being set for 2023.

Of note: Steve Lipin, CEO of Gladstone Place Partners, said well-capitalized buyers are getting ready to make a move. But he echoed the view that volatility continues to keep CEOs from pouncing, as budgets and belt-tightening are their main focus.

  • "Fast firing has replaced quiet quitting," he said.

Zoom in: SPACs that went public with a flare, but quickly saw their value fizzle, offer buying opportunities.

  • Many de-SPAC companies' "viability as standalone entities are questionable. And they’re very cheap," said deal lawyer Ed Batts, a Gibson Dunn partner.
  • "The interesting thing about de-SPACs is that, unlike prior cycles, it's very easy to understand where they're at. They all started at $10. If they're at 78 cents, you know there's been a significant depreciation," Batts added.

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