2014 Saw All-Time High for Medical Device M&A

The medical device industry witnessed an all-time record high in terms of deal valuations in 2014, with a total of 96 mergers and acquisitions (M&As) announced, representing an increase of 18.5 percent compared with 2013, according to an analyst with London, U.K.-based research and consulting firm GlobalData.

According to Niharika Midha, GlobalData’s analyst covering medical devices, the unusually high amount of M&A activity last year highlights a trend that goes beyond mega-mergers and into the expansion of product portfolios.

“A considerable number of deals in 2014 involved larger companies swallowing up smaller ones with novel technologies that were clinically proven to be superior to existing devices,” Midha said. “This definitely sets the tone for the coming year, as the medical device industry consolidates into fewer prominent players that directly compete with each other and innovation is fueled by heightened demand.”

The largest deal of 2014, of course, was the much-discussed $42.9 billion acquisition of Covidien plc by Medtronic Inc. Despite criticism that the move was rooted in tax inversion, GlobalData’s analyst believes there were a number of strategic motives behind the deal.

“Covidien has an established market position in surgical and wound care specialties, which are promising segments,” said Midha. “Medtronic can now readily leverage this reputation for an expanded product portfolio and enhanced global footprint. Additionally, Covidien has been expanding its business in patient monitoring and hospital services, areas likely to generate significant revenue in the near future.”

The analyst added that players with an extensive product portfolio tend to have a competitive advantage in the current industry scenario.

“The demand side is displaying an increasing preference for manufacturers that offer a one-stop solution for all their needs,” Midha said.