Sounding Board: The BD-Bard Transaction

Mega-mergers are becoming an annual event in the medtech industry among major players, many of whom have residence in the MPO Top 30 Company list. In 2014, the Medtronic-Covidien announcement was made. The next year, we saw Zimmer acquire rival Biomet. Last year, St. Jude was gobbled up by Abbott, who also made a move on Alere—a deal finally expected to close in the third quarter of this year. And now, 2017 has seen its big medtech M&A transaction. Its been announced that BD (Becton, Dickinson and Company) will pay $24 billion for C.R. Bard.
 
While the actual participants of the deal may be surprising, this transaction is simply “more of the same” in terms of major M&A activity among medical device manufacturers. And it may not be the only significant merger in 2017 as there’s plenty of time left for another to be announced.
 
MPO reached out to several members of the industry, many of whom are members of the editorial advisory board and/or regular columnists for the magazine, to get reactions to the BD-Bard announcement.
 
Mark Bonifacio, founder and president of Bonifacio Consulting Services LLC, offered some insights. “It’s certainly what we’ve been predicting after Medtronic-Covidien, Abbott-St. Jude, BD-Carefusion, and now this. And I see it continuing. These transactions may not be the best for the long-term health of the industry, but don’t count on it stopping in the near term. In addition, for those players who have stayed on the sidelines thus far with regard to M&A activity, they will certainly feel additional pressure to do something. Finally, in the device space, we are now seeing a new class of what I like to call ‘Super OEMs’—Medtronic, Abbott, and now BD. That’s a list that will continue to grow. This type of activity has rapidly changed our landscape from even just a few short years ago.”
 
“This is a surprising deal, but there are some nice clinical and procedural synergies to be had with BD’s and Bard’s product portfolios, and BD’s manufacturing expertise will blend nicely with Bard’s OEM business. As good as it is for BD (and Bard shareholders), I question how good this is becoming for the industry. It is easy to foresee a day with a ‘Big Three’ in each of the major clinical sectors (e.g., orthopedics, cardiovascular, neurology, etc.) with a couple of others” sprinkled here and there. The ‘too big to fail’ problems we saw in the financial, automotive, and insurance industries (and still do, to an extent) may soon befall the medical device sector,” said Perry De Fazio, vice president at Covington Associates.
 
“The consolidation of BARD and BD is yet another key indicator that the healthcare value chain RE-configuration is alive and well. Organizations continue to consolidate in order to harness synergies where overlapping value and supply chain capabilities exist within their organizations.  Additionally, these mergers drive downstream reconfigurations as the consolidated OEMs look to consolidate their spend within their supply bases. Bottom line, OEM supply chain integrators are going to be very busy,” explained Chris Oleksy, CEO of Next Life Medical/Emergent Respiratory, and Oleksy Enterprises.
 
Bill Ellerkamp, principal at Acceleration Medtech, shared his thoughts as well. “Coming hot on the heels of the Cardinal acquisition of Medtronic’s (formerly Covidien) medical supplies business, the BD acquisition of Bard will ensure that BD remains right there with Cardinal in the med/surge space. The resulting two giants of medical supplies, Cardinal and BD, will have significant advantages in delivering value-based solutions across the healthcare continuum. This consolidation is sure to prompt a response from many smaller competitors, and is likely to result in both new outsourcing opportunities, as well as consolidation at the supplier level to strengthen the size and scope of credible outsourcing partners. Fasten your seatbelts and get ready for the ride!”

Dave Sheppard, principal at MedWorld Advisors, stated, “The acquisition of Bard by BD is good news for medical M&A activity in 2017. I look forward to more deals of various sizes to come.”

Anthony S. Freeman, managing director of Manning Advisors LLC, provided several different perspectives based on how one might look at this latest deal:

• From a BD perspective—The deal makes sense as it allows BD to gain greater penetration of hospital buying groups with strong, high-margin products (particularly in urology and oncology—areas where BD lacks its traditional dominance). Like the Carefusion deal, the Bard deal both allows for greater penetration in major customers while diversifying the offer in favor of non-commodity products. 
• From a Bard perspective—Despite a great product portfolio in a few important areas of medicine, Bard has struggled to move from the mature U.S. and European markets to be a truly global supplier. BD stands an excellent chance of carrying Bard products to the rapidly growing device markets of the developing countries.
• From a large OEM perspective—A further rounding out of the list of the mega-OEMs. Like other top 10 OEMs, BD will increasingly be able to service most hospital departments on any continent. Less global, more specialized companies will have a harder time competing. Still, there are not that many needle-mover deals out there for the major OEMs so, unless pharma companies move actively into device company acquisitions, we are seeing the tail end of this strategy.
• From the supply chain perspective—Another one bites the dust. While it will likely be two to three years before any meaningful consolidation of supply chains begins, the supply chain will eventually have one fewer door to knock on. Given OEM consolidation of approved vendor lists, the eventual benefit is likely to the larger, diversified contract manufacturer.

Bryan Hughes, director at PMCF, commented, “Much like the earlier Medtronic-Covidien transaction, Becton Dickinson’s acquisition of Bard brings together two companies with very complementary product portfolios. It is interesting to note that much like in the Medtronic transaction, communication around this deal has also focused on the benefits outside the U.S. BD is paying a fairly high price, but in the end, could signal a reassessment of other larger transactions across medtech.”