The Top 30 and M&A in 2021: What’s Next?

With MPO’s annual Top Companies issue in the rearview mirror and the end of this bizarre year quickly approaching, we thought it would be the perfect time to provide an update on some of these firms’ M&A activities. Specifically, we’ll explore the likely pursuits for the upper half of the medtech industry’s leaders. With three of the top five companies appointing new chief executives in the last year and the global pandemic eroding earnings, M&A strategies could look a lot different going forward.

1. Medtronic: Having changed leadership this year, it appears that Medtronic will continue to be active in M&A through incremental acquisitions. While former CEO and Chairman Omar Ishrak preferred high-impact deals (i.e., Covidien purchase), his replacement—Geoffrey S. Martha—seems keen on inorganic growth via bolt-on acquisitions to fill portfolio gaps and participate in adjacent spaces. Watch for several smaller deals from Medtronic in 2021.

2. J&J: With Ashley McEvoy as executive vice president and worldwide chairman of Medical Devices, J&J seems poised to be aggressive on acquisitions of all sizes that benefit patients. In announcing the Auris Health acquisition last February, she noted that J&J is “focused on building a connected, data-driven digital ecosystem that pairs…surgical solutions with advanced technologies to improve the patient experience.” Translation: Digital health is now a key part of the company’s long-term growth strategy. Auris won’t be the last of J&J’s digitally-driven purchases.

3. Abbott Laboratories: Since acquiring both St. Jude Medical Inc. and Alere Inc. in the last several years, former CEO Miles White eased up on M&A to allow the company to digest its purchases and firm up its operating efficiencies as a larger entity. White’s retirement could induce a return to a more aggressive M&A strategy under the direction of new CEO Robert Ford. Stay tuned.

4. GE Healthcare: Loyal Wall Street observers have watched General Electric struggle with its balance sheet for the past few years. Those struggles prompted the company to divest its Life Sciences business to Danaher Corporation for approximately $21 billion last year. With Larry Culp as CEO, GE seems to be improving its cashflow, which should allow GE Healthcare’s executive team to pursue more targeted deals in 2021. Smaller, tuck-in purchases seem to be a favored tactic here, so don’t expect any major acquisitions in the next 12 months. But, never say never: Siemens Healthineers’ $16.4 billion acquisition of Varian Medical Systems Inc. (August) could lead GE Healthcare to make a play for Swiss radiotherapy provider Elekta.

5. BD: CEO Vincent Forlenza’s retirement in January left new chief executive Thomas Polen in charge of defining the company’s role in battling COVID-19, as well as shaping its future growth strategy. Besides the pandemic, Polen’s first priorities have included addressing the company’s EtO sterilization challenges and the Alaris infusion pump recall. BD needs some new products across its business segments, so watch for smaller, more incremental deals next year to fill portfolio gaps.

6. Philips Healthcare: Philips has built its Image-Guided Therapies business through aggressive M&A in recent years, including its $275 million acquisition of Intact Vascular in August. Yet the company also has bolstered its Connected Care segments through incremental technology grabs. This combination will presumably continue as Philips focuses on its core segments but like GE Healthcare, Philips might be eyeing up Elekta to counter the Siemens-Varian union.

7. Siemens Healthineers: The blockbuster Siemens-Varian deal has most certainly shaken the landscape of major imaging companies. By purchasing Varian, Siemens is taking an aggressive approach in its attempt to gain cancer diagnostics market share. The company will probably scale back on M&A early next year to allow time for Varian’s integration but then return after that to pursuing bolt-on deals to bolster key product portfolios.

8. Cardinal Health: Growth in the company’s medical device business has been difficult in recent years, despite its $6 billion acquisition of former Covidien business units from Medtronic plc in 2017. The global pandemic may have boosted Cardinal’s performance in the short run, perhaps giving the firm the incentive it needs to reinvigorate its business strategy. Although the opportunity for growth exists through commercial channels, the company’s poor R&D/innovation performance shows that Cardinal will have to secure its future with some savvy M&A.

9. Stryker Corp.: An aggressive growth company (organically and inorganically), Stryker always seems to have a trick or two up its sleeve. Case in point: Its 2017 acquisition of NOVADAQ Technologies Inc. was a twist that most analysts did not expect. Since then, Stryker has added to its imaging platform with the $500 million acquisition of Mobius Imaging LLC. Yet not all of the company’s deals are surprising, as evidenced by its bid for Wright Medical (still under U.S. and U.K. antitrust reviews). Stryker most likely continue its aggressive approach to M&A next year, though it may confound Wall Street with another surprise or two.

10. Baxter: CEO Joe Almeida’s growth strategy has always been “back to future.” Since his tenure as Covidien’s chief executive, Almeida has worked to boost his company’s portfolio through innovation and inorganic activity; in essence, he’s creating a future that builds on past successes. Unfortunately, Baxter’s accounting missteps have temporarily sidetracked the company’s M&A activity but that could change in 2021 as Almeida seeks out incremental acquisitions to augment his company’s existing innovations. A major deal, however, is not out of the question.

11. Boston Scientific Corp.: Under Michael C. Mahoney’s leadership, Boston Scientific has consistently been lauded for its M&A strategy and execution. Inorganic actions have significantly boosted the company’s growth rates and bottom line but COVID-19 took a big bite out of profits. Nevertheless, expect Boston Scientific to engage in another shopping spree next year as it regains its financial footing.

12. EssilorLuxottica: After partnering in a grand merger two years ago, EssilorLuxottica tried expanding its market presence by offering an $8 billion dowry for Dutch opticians group GrandVision. However, EU regulators and the global pandemic have stalled the proposed union. EssilorLuxottica hasn’t given up, though, and will likely fight for GrandVision’s hand in marriage in 2021. In the meantime, don’t expect much new M&A activity from EssilorLuxottica, as it clearly is distracted on many levels.

13. B.Braun: Another leadership change, another uncertain road ahead for M&A. Historically, B.Braun has been very methodical and purposeful about selective M&A; based on its culture, that selectivity should continue, though new CEO of America Jean-Claude Dubacher (replacement for Caroll Neubauer) could have a different M&A strategy in mind. Only time will tell.

14. Zimmer Biomet Holdings Inc.: With Bryan Hanson at the helm, Zimmer Biomet was becoming a Wall Street darling for its impressive earnings growth. Coming into 2020, analysts expected the company to get more aggressive with tuck-in M&A activity but the pandemic-induced suspension of elective surgeries significantly impacted Zimmer Biomet’s finances. Consequently, the company has had more of an operational focus this year as it tries to regain lost profit. Once COVID-19 is finally under control (perhaps in 2021?) Zimmer Biomet will be back on the hunt for bolt-on acquisitions that stimulate growth and expand its offerings.

15. 3M: At its core, 3M is a diverse business with proud legacy product lines but its healthcare business, has historically experienced minimal growth. However, the company has attempted to jump-start its healthcare earnings in recent years through aggressive portfolio management (divestitures and acquisitions). Last year’s purchase of Acelity has had a significant impact on its healthcare group performance and momentum. Although it understandably has been distracted this year with COVID-19-related PPE shortages, 3M will be back in the M&A game (aggressively, no doubt) in the coming years. Certainly, additional incremental acquisitions should be expected, though it wouldn’t be all that surprising to see 3M forge another Acelity-type deal to enhance its healthcare business status and momentum.

In summary, we expect industry strategics to be aggressive in M&A next year with most deals being incremental in nature to bolster portfolios and/or financial performance. However, it will be exciting to watch for the next blockbuster acquisition that will become another dynamic game-changer in the medtech industry. 

---

Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at [email protected].

Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at [email protected].