Blog: Complementary and strategic deals to dominate medical technology M&A

Apr 24th 2017 Author:

Michael Jewell

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The UK medical technology sector, which is currently worth 7.6 billion GBP[1] is thriving and M&A activity is forecast to continue growing. As market pressures from competitors increase, we expect the pace of M&A in the medical technology industry to accelerate in the UK and globally, with complementary transactions and strategic bolt-on deals shaping activity.

A significant transaction which closed at the beginning of this year and which kicked off M&A activity in the industry was medtech giant Abbott’s consolidation with St. Jude in a $25billion deal – a deal which has created a medtech powerhouse in the cardiovascular and neuromodulation markets. This complementary deal will bring out important synergies by combining St Jude’s top position in heart failure, atrial fibrillation and cardiac rhythm management, with Abbott’s leading expertise in coronary intervention and transcatheter mitral repair.

Strategic deal-making is key part of the industry and bigger players continue to spend billions snapping up smaller companies that can fill their portfolio gaps and provide them with new technology and better geographical reach. In acquiring smaller medtech firms through strategic bolt-on deals, bigger counterparts get access to innovative technology that enhance their offering and products.

Demographic shifts have also been important catalysts for strategic M&A activity in the medtech industry. Aging populations with increasingly complex healthcare needs are driving demand for innovative treatments, which in turn are increasing demand for the firms developing these products. The changing healthcare needs of the public are creating opportunities for smaller, medtech companies to penetrate the medical services market to respond to need for innovative and diverse medical technology.

Deals earlier this year illustrate the growing trend for complementary transaction and strategic bolt-ons in the medtech sector, which we expect to continue and gather pace. Hill-Rom, the leading global medical technology company purchased Mortara Instruments, a leader in diagnostic cardiology and patient monitoring solutions, technologies and devices in a $330million deal. Hologic sold its stake in the Procleix blood-screening business for $1.85 billion to Barcelona-based Grifols, and Johnson & Johnson’s acquired Abbott Medical Optics from Abbott Laboratories for $4.3bn. The US healthcare giant is also set to acquire Swiss biotech company Actelion in a $30 billion all-cash deal.

There have also been a whole host of deals involving mid-market medtech companies, largely being bought by bigger players, so we to expect the area could be one of our most active in 2017.