What’s Hot Now in Medtech M&A

Every M&A cycle in the life sciences/medtech sector fosters exciting deals that interestingly impact the industry in both the short and long term.

The current M&A “Pandemic Cycle” is no different. After a brief pause in the second quarter last year (along with most other business deal-making activity), the medtech realm has experienced a continuous series of deals across various subsectors.

The various transactions from July through December 2020 is reflected in the table.

Timing	Estimated Value	Acquirer	Seller	Market Segment	Deal Driver	Close Timing
Aug. 2020	$16.4B	Siemens Healthineers	Varian Medical	Radiation Oncology	Market Share	1H 2021
Aug. 2020	$18.5B	Teladoc	Livongo	Telehealth	Market Share	Oct. 2020
Aug. 2020	ND	Medtronic	Companion Medical	Continuous Glucose (CGM)	Innovation	Nov. 2020
Aug. 2020	ND	Digital Diagnostics	3Derm	Diagnostics	Innovation	Aug. 2020
Aug. 2020	$80M	Hologic	Acessa	Women’s Health	Innovation	Aug. 2020
Aug. 2020	$360M	Philips	Intact Vascular	Vascular	Innovation	Q4 2020
Sept. 2020	$60M	Intersect ENT	Fiagon AG Medical	ENT	Innovation	Oct. 2020
Sept. 2020	$248M	Qiagen	NeuMoDx	Diagnostics	Innovation	Sept. 2020
Sept. 2020	$8B	Illumina	Grail	Diagnostics	Innovation	2H 2021
Sept. 2020	$240M	S&N	Integra	Ortho Extremities	Market Share	Jan. 2021
Sept. 2020	ND	Medtronic	Avenu Medical	Vascular Access	Innovation	Oct. 2020
Oct. 2020	$850M	Steris	Key Surgical	OR Sterile Processing	Market Share	Nov. 2020
Oct. 2020	$2.15B	Exact Sciences	Thrive Earlier Det	Diagnostics	Innovation	Q1 2021
Oct. 2020	$410M	Exact Sciences	Base Genomics	Diagnostics	Innovation	Q1 2021
Oct. 2020	$525M	Teleflex	Z-Medica	EMS	Market Share	Dec. 2020
Oct. 2020	ND	Medtronic	AI Biomed	ENT	Innovation	Oct. 2020
Nov. 2019	$4.7B	Stryker	Wright Medical	Ortho Extremities	Market Share	Nov. 2020
Dec. 2020	$250M	Zimmer Biomet	A&E Medical	Sternal Closure	Innovation	Dec. 2020
Dec. 2020	$73M	Gyrus Capital	LivaNova	Heart Valves	Portfolio Divestiture	1H 2021
Dec. 2020	$340M	Olympus	Veran	Resp/ Lung Cancer	Innovation	Dec. 2020
Dec. 2020	$2.8B	Philips	BioTelemetry	RPM	Innovation	Q1 2021

ND = not disclosed

The flurry of activity has spilled into 2021, as more than 10 M&A agreements were announced in the first six weeks of the year. Some of the key active players thus far in 2021 include Hologic Inc., Stryker Corp., Hillrom, PerkinElmer, Steris Corporation, Royal Philips N.V., Thermo Fisher Scientific, Haemonetics Corporation, and Boston Scientific Corp.

These players represent a wide spectrum of industry strategics in the medtech and life sciences arenas. So what is driving this M&A activity?

The macro financial situation certainly has been a significant influence. Governments have freely been spending money to subsidize economic activity, therefore the cost of money has become historically inexpensive during the pandemic. Financially, this is problematic for companies sitting on cash because they may actually be losing money by doing nothing with it. The current financial atmosphere is actually more conducive to larger deals because the price to borrow money is now practically zero. Consequently, company boards—especially at larger firms—are incentivized to use available cash and liquidity to drive their organizations’ strategic initiatives.

Obviously, the current macro financial cycle will eventually change as the pandemic winds down and governments stop financing short-term economic activity. At that point, the cost of money will rise and the M&A cycle will slow again. Until then, however, life sciences and medtech M&A should continue strongly this year as industry strategics and investors that have almost “free” access to cash find ways to spend it.

Indeed, the macro financial situation is heating up the M&A market, but there are also underlying motivators for some of the specific M&A transactions that have already occurred. Generally, the top four drivers of strategic M&A deals are the desire to procure either a competitor, customer, technology, or IP.

Based on M&A transactions listed in the table, the top two deal drivers between July 2020 and late January 2021 have been market share growth or innovation.

An analysis of several market share-driven deals listed in the table shows how they complement the participants’ overall growth strategies:

Stryker’s purchase of Wright Medical’s extremities implant business. Stryker clearly is shoring up its portfolio offering in orthopedic implants to improve its market share in that market segment.
Smith+Nephew’s acquisition of Integra Lifesciences’ extremities implant business. This is a direct competitive match by Smith+Nephew to enhance its portfolio offering in orthopedic implants to improve its market share and more effectively compete with Stryker.

Teladoc’s acquisition of Livongo. One of the old adages in M&A is “if you can’t beat them, buy them.” Although Teladoc would have been competitive even without this deal, it’s clear the addition of Livongo eliminates a major competitor and solidifies market share going forward.

Likewise, an analyis of several innovation-driven deals provides a clearer picture of some underlying technology trends.

Medtronic’s “tuck-in” acquisitions in 2021. Each transaction could be listed separately, but they all seem to follow another M&A adage: “If you can’t build it, buy it.” Large companies have challenges with timely R&D to maintain a technological competitive edge. Therefore, when required, they simply find it and buy it. Medtronic’s current philosophy, as stated by CEO Geoff Martha, is to execute on precisely that plan.

Many diagnostics deals are either driven by cancer or COVID-19. The moves made by key industry players in the diagnostics sector have clearly been heavily influenced by the pandemic. And why not? Large players in that market with access to easy money would be foolish not to take advantage of the positive financial conditions. Longer term, cancer has been a hot market and will continue to be a growth driver for the future. It’s encouraging that the cancer market is not being ignored amid the pandemic.

Philips’ BioTelemetry deal could theoretically be categorized as either market share- or innovation-driven. As an existing player in remote patient monitoring (RPM), Philips is definitely expanding its market footprint but it’s the innovation developed by BioTelemetry that will actually be driving the growth for Philips. That innovation will affect Philips’ business model, IP, and further research into RPM technology.

When analyzing M&A activity, it’s also interesting to discover the trends that unfold or sometimes simply the copycat (competitive matching) activity that transpires. For example, Stryker’s purchase of Wright Medical’s extremities business prompted Smith+Nephew to broker the Integra deal. Similarly, the Philips-BioTelemetry marriage led Hillrom and Boston Scientific to quickly expand their own remote patient monitoring offerings through acquisitions.

Another way to break down the current M&A activity is by determining the ways the underlying innovation drivers will make a difference for the life sciences and medtech industries both today and in the future. These innovation drivers include digital health, technology speed, and the proverbial “better mouse trap.”

Digital health’s key underlying “hot spots” include sensors, wearables, and data. Digital health is driving important industry trends from macro opportunities like population management to specific product opportunities (for example, Stryker’s recent acquisition of sensors to improve its orthopedic implant performance).

Separately, technology speed is something that has been addressed aggressively since the inception of computers and processors. In the life sciences and medtech markets, technology speed is making a difference across spectrums as robotics, artificial intelligence surgical planning, COVID-19 diagnostics, and cancer.

Of course, there is no substitute for “the better mouse trap.” Patient care is improving on a daily basis due to the next generation of wound care, surgical instruments, implants, and other advancements.
These insights can help companies plan growth strategies, whether they be a potential M&A buyer or seller. Organizations with access to liquidity might consider drafting M&A plans to improve their future market positions at a relatively low capital cost.

It’s also an interesting time to explore exit strategy options as valuations are extremely healthy due to the aforementioned easy access to money. Whether on the buy or sell side, companies would be wise to seek outside objective opinions on options, pathways, and possibilities. Professionals involved in the current pulse of the medtech industry and M&A trends can help organizations develop solid growth plans that maximize market opportunities. 

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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] or at www.medworldadvisors.com

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].