Do rising interest rates actually fuel pharma M&A? Sometimes, yes

[Andrey Popov/Adobe Stock]

Conventional wisdom holds that rising interest rates curb M&A activity, but an analysis of the pharma and biotech M&A data from 2018 to early October 2023 reveals a counterintuitive trend — at least over the short term.

As interest rates have risen in 2023, pharma deal-making has remained strong although the deal size has dipped. As rates surpassed 2.4% from September 2022 onwards, deal activity jumped to an average of roughly 6 deals per month. For context, when interest rates ranged from 1.4% to 2.4% from 2018 to 2019, the industry averaged roughly 2 deals per month. While there was a relative increase in M&A volume during the historically low-interest period of 2020 to August 2022 when rates dropped to as low as 0.05%, the average number of deals per month then  — 3.3 — is still markedly lower than recent levels.

One possibility is that higher interest rates are s…

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