USA – CALIFORNIA Trends and Developments Contributed by: Mehdi Khodadad, Dan Clivner, Vijay Sekhon and Matthew Thompson, Sidley Austin LLP
ware, life sciences and consumer platforms. Cali - fornia’s health and beauty sector is also generating significant deal activity, as strategic acquirers and private equity sponsors target direct-to-consumer brands and clean beauty companies that have lever - aged the state’s innovation ecosystem and consumer trends to build national and global customers. Buyers in these transactions are placing particular empha - sis on brand authenticity, digital customer acquisition strategies, and regulatory compliance with California’s increasingly stringent cosmetics safety and labelling requirements, including the California Toxic-Free Cos - metics Act. In the California deal environment, disci - plined diligence, credible regulatory positioning and resilient financing structures will separate successful processes from stalled ones. Life sciences Overview of the California life sciences M&A market California’s life sciences sector continues to be one of the most active M&A markets in the USA, reflect - ing the state’s concentration of biotechnology, phar - maceutical, diagnostics, and medtech companies. At the same time, the deal environment is evolving as regulatory scrutiny and market dynamics reshape transaction structures and execution. California remains a global hub for biotechnology and pharmaceutical innovation, with cities such as San Francisco, San Diego, and Los Angeles driving deal activity across therapeutics, diagnostics, and research technologies. A defining characteristic of California’s life sciences M&A market is the scale of capital flowing into the sector. According to Biocom’s California 2025 Life Science Economic Impact Report, California-based life sciences companies attracted USD63.1 billion in investment in 2024, with corporate M&A accounting for roughly two-thirds of life sciences investment activity in the state. Drivers of life sciences M&A activity Industry data suggests life sciences M&A has regained momentum following uncertainty after a COVID- induced peak in 2021. Large pharmaceutical compa - nies continue to pursue acquisitions to replenish drug pipelines and access innovative technologies devel - oped by smaller biotech companies. Recent market analyses show that deal making accelerated in the
latter part of 2025, with average deal sizes increas - ing significantly year-over-year as buyers focused on acquiring later-stage or de-risked assets, includ - ing companies with products further along in clinical development. California-based companies are frequently at the cen - tre of strategic acquisitions and M&A transactions in the life sciences sector due to the state’s ecosystem of venture-backed biotechnology firms and university- driven research. Biotechnology, pharmaceutical, and medtech companies each represent approximately one-third of life sciences deal activity globally, high - lighting the breadth of subsectors generating acquisi - tion opportunities. Strategic buyers continue to derisk development stage acquisitions through significant shifting of value to future milestones in private deals or contingent value rights in public deals. Private equi - ty firms also remain active participants, accounting for roughly one-quarter of sector deal value in recent years, particularly in healthcare technology, diagnos - tics, and life sciences services. In California, venture investors have increasingly concentrated capital in later-stage companies, favouring fewer but larger transactions as the sector adapts to constrained fun - draising. Regulatory developments Despite this activity, California’s regulatory environ - ment is becoming an increasingly important con - sideration for deal makers. Recent legislation has expanded oversight of healthcare transactions involv - ing private capital. In October 2025, Governor Gavin Newsom signed Assembly Bill 1415, which broadens the state’s healthcare transaction review framework to require private equity firms and hedge funds to provide advance notice of certain healthcare trans - actions to the California Office of Health Care Afford - ability (OHCA), a state agency monitoring healthcare market costs and competition. Assembly Bill 1415 took effect in January 2026 and requires private equity firms and hedge funds to pro - vide at least 90 days’ notice prior to closing certain transactions involving healthcare entities or manage - ment services organisations. While OHCA review does not grant regulators authority to veto transactions out - right, it increases transparency around deal structures
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