Michael Barbella, Managing Editor11.22.23
It may not be the most favored or famous Shakespeare play (reputedly unpopular even in the Bard’s day), but “All’s Well That Ends Well” certainly is rife with familiar quotes.
Among the more notable lines from the five-act comedy—besides the title—are “Love all, trust a few, do wrong to none...” “No legacy is so rich as honesty,” and “Good alone is good without a name, vileness is so.”
There’s another line, however, that’s far less prominent but nevertheless applicable to 21st century living: “...Oft expectation fails and most oft there; Where most it promises, and oft it hits; Where hope is coldest and despair most fits.”
Translation? Great expectations beget great disappointments.
All too true.
Consider, for example, the past year in medtech M&A. Analysts expected deal volume and value to bounce back significantly in 2023 after falling sharply last year from 2021’s exceptionally high levels. That logic was based on the strong balance sheets diagnostics companies built from COVID-19 testing and vaccine revenue as well as “opportunistic equity and debt raises” resulting from low interest rates, MM+M (Medical Marketing and Media) reported.
“With this backdrop in mind, the conditions appear ripe for a return to historical M&A activity in 2023 and 2024 despite elevated interest rates as large-cap names in LST [life science tools] and Dx seek to deploy their cash balance or lever themselves for the appropriate asset (public or private),” predicted an SVB Securities report published earlier this year. Also contributing to SVB’s dealmaking optimism was the life sciences industry’s limited ability to raise capital and falling multiples, MM+M noted.
Great Expectations.
But those falling multiples, capital-raising difficulties, and huge cash balances failed to restore medtech merger and acquisition activity to its former glory. In H1 2023, venture financing suffered its worst showing in eight years and public exits stopped altogether, pushing transaction dollars and tallies toward historic lows.
Great Disappointment.
While deal volume was strong through June 30 (42 total), overall M&A value was down significantly from last year and exponentially from 2021, data from several industry sources show. Buyers poured $13.1 billion into agreements during the first six months of 2023—a paltry start compared to the previous two years’ totals ($64.8 billion in 2022, $80.5 billion in 2021).
Analysts and M&A advisors attribute this year’s leaner deal value total to the lack of megamergers—i.e., the blockbuster marriages between juggernauts like Medtronic and Covidien, Zimmer Holdings and Biomet, Abbott and St. Jude Medical, BD and C.R. Bard, and Johnson & Johnson and Abiomed, among others.
“There’s not as many of the megadeals that have taken place—the larger strategics combining. There’s some of that going on, like Globus just combined with NuVasive but they were smaller companies comparatively, if you think about some of the previous years where Becton Dickinson bought out Bard and Medtronic bought out Covidien,” Dave Sheppard, managing director and COO of M&A advisory firm MedWorld Advisors, noted in a Sept. 27 webinar. “The value of deals may be less but the actual volume of deals is continuing to be very strong. They are very focused strategic deals and very opportunistic for private equity as well.”
While lingering inflation, rising interest rates, and recession fears certainly unnerved buyers this year, regulatory concerns and integration issues likely were greater obstacles to sizable acquisitions. Companies initiating megadeals will often divest parts of the business that no longer strategically fit into the combined entity’s future growth strategy, M&A advisors note.
Cases in point: Baxter International and BD each have conducted major acquisitions in recent years, and both divested part of their respective businesses in 2023. Baxter sold its biopharma solutions business in May for $4.25 billion to two private equity firms to reduce its $16 billion debt load, part of which it assumed in acquiring Hillrom two years ago for $12.7 billion (a portion of that transaction was funded by debt).
BD, meanwhile, sold its surgical instrumentation platform in June to STERIS for $540 million to simplify its product portfolio and manufacturing network.
Baxter’s divestiture was the largest deal (value-wise) to occur in the first half of 2023. Others included Coloplast’s $1.3 billion purchase of Kerecis; Resonetics’ $900 million purchase of Memry Corp. and SAES Smart Materials from Italy-based parent company SAES Getters S.p.A.; Abbott’s $890 million buyout of Cardiovascular Systems Inc.; and Medtronic’s $738 million bid for EOFlow.
“We’ve seen some quite large deals,” Medword Advisors President Florence Joffroy Black explained in the webinar, “but the focus right now is on quality mid-market deals and strategic acquisitions rather than the big multi-billion-dollar deals that we’ve seen in the past.”
There were plenty of those mid-market deals and strategic acquisitions this year: Olympus bolstered its GI product lineup with the $370 million addition of Korean gastrointestinal metallic stent maker Taewoong Medical; ResMed expanded its sleep management software portfolio (and further encroached on Philips’ dwindling market share) with its purchase of Somnoware; Merit Medical chased dialysis and biopsy market share with its $100 million offer for AngioDynamics’ catheter portfolio and biopsy system; and Varian (a Siemens Healthineers company) expanded its advanced oncology solutions offerings with its pickup of Aspekt Solutions.
“Mid-market deals are in more demand than ever,” Joffroy-Black said. “It’s definitely the sweet spot for M&A without a doubt.”
And the path to sweeter profits, for sure.
Read more: bit.ly/3tAR4bO
Check out more of MPO's 2023 year in review:
MDR’s Maddening Merry-Go-Round
A Clean Start for EtO
The Legacy of Elizabeth Holmes
Philips Breathes No Easier in Respiratory Recall
Among the more notable lines from the five-act comedy—besides the title—are “Love all, trust a few, do wrong to none...” “No legacy is so rich as honesty,” and “Good alone is good without a name, vileness is so.”
There’s another line, however, that’s far less prominent but nevertheless applicable to 21st century living: “...Oft expectation fails and most oft there; Where most it promises, and oft it hits; Where hope is coldest and despair most fits.”
Translation? Great expectations beget great disappointments.
All too true.
Consider, for example, the past year in medtech M&A. Analysts expected deal volume and value to bounce back significantly in 2023 after falling sharply last year from 2021’s exceptionally high levels. That logic was based on the strong balance sheets diagnostics companies built from COVID-19 testing and vaccine revenue as well as “opportunistic equity and debt raises” resulting from low interest rates, MM+M (Medical Marketing and Media) reported.
“With this backdrop in mind, the conditions appear ripe for a return to historical M&A activity in 2023 and 2024 despite elevated interest rates as large-cap names in LST [life science tools] and Dx seek to deploy their cash balance or lever themselves for the appropriate asset (public or private),” predicted an SVB Securities report published earlier this year. Also contributing to SVB’s dealmaking optimism was the life sciences industry’s limited ability to raise capital and falling multiples, MM+M noted.
Great Expectations.
But those falling multiples, capital-raising difficulties, and huge cash balances failed to restore medtech merger and acquisition activity to its former glory. In H1 2023, venture financing suffered its worst showing in eight years and public exits stopped altogether, pushing transaction dollars and tallies toward historic lows.
Great Disappointment.
While deal volume was strong through June 30 (42 total), overall M&A value was down significantly from last year and exponentially from 2021, data from several industry sources show. Buyers poured $13.1 billion into agreements during the first six months of 2023—a paltry start compared to the previous two years’ totals ($64.8 billion in 2022, $80.5 billion in 2021).
Analysts and M&A advisors attribute this year’s leaner deal value total to the lack of megamergers—i.e., the blockbuster marriages between juggernauts like Medtronic and Covidien, Zimmer Holdings and Biomet, Abbott and St. Jude Medical, BD and C.R. Bard, and Johnson & Johnson and Abiomed, among others.
“There’s not as many of the megadeals that have taken place—the larger strategics combining. There’s some of that going on, like Globus just combined with NuVasive but they were smaller companies comparatively, if you think about some of the previous years where Becton Dickinson bought out Bard and Medtronic bought out Covidien,” Dave Sheppard, managing director and COO of M&A advisory firm MedWorld Advisors, noted in a Sept. 27 webinar. “The value of deals may be less but the actual volume of deals is continuing to be very strong. They are very focused strategic deals and very opportunistic for private equity as well.”
While lingering inflation, rising interest rates, and recession fears certainly unnerved buyers this year, regulatory concerns and integration issues likely were greater obstacles to sizable acquisitions. Companies initiating megadeals will often divest parts of the business that no longer strategically fit into the combined entity’s future growth strategy, M&A advisors note.
Cases in point: Baxter International and BD each have conducted major acquisitions in recent years, and both divested part of their respective businesses in 2023. Baxter sold its biopharma solutions business in May for $4.25 billion to two private equity firms to reduce its $16 billion debt load, part of which it assumed in acquiring Hillrom two years ago for $12.7 billion (a portion of that transaction was funded by debt).
BD, meanwhile, sold its surgical instrumentation platform in June to STERIS for $540 million to simplify its product portfolio and manufacturing network.
Baxter’s divestiture was the largest deal (value-wise) to occur in the first half of 2023. Others included Coloplast’s $1.3 billion purchase of Kerecis; Resonetics’ $900 million purchase of Memry Corp. and SAES Smart Materials from Italy-based parent company SAES Getters S.p.A.; Abbott’s $890 million buyout of Cardiovascular Systems Inc.; and Medtronic’s $738 million bid for EOFlow.
“We’ve seen some quite large deals,” Medword Advisors President Florence Joffroy Black explained in the webinar, “but the focus right now is on quality mid-market deals and strategic acquisitions rather than the big multi-billion-dollar deals that we’ve seen in the past.”
There were plenty of those mid-market deals and strategic acquisitions this year: Olympus bolstered its GI product lineup with the $370 million addition of Korean gastrointestinal metallic stent maker Taewoong Medical; ResMed expanded its sleep management software portfolio (and further encroached on Philips’ dwindling market share) with its purchase of Somnoware; Merit Medical chased dialysis and biopsy market share with its $100 million offer for AngioDynamics’ catheter portfolio and biopsy system; and Varian (a Siemens Healthineers company) expanded its advanced oncology solutions offerings with its pickup of Aspekt Solutions.
“Mid-market deals are in more demand than ever,” Joffroy-Black said. “It’s definitely the sweet spot for M&A without a doubt.”
And the path to sweeter profits, for sure.
Read more: bit.ly/3tAR4bO
Check out more of MPO's 2023 year in review:
MDR’s Maddening Merry-Go-Round
A Clean Start for EtO
The Legacy of Elizabeth Holmes
Philips Breathes No Easier in Respiratory Recall