After a quiet 2016, medtech mergers are back. The sum spent on deals in the first half has already surpassed last year’s total, putting 2017 on track to be the second-biggest year for medtech acquisitions in a decade, behind only a mammoth 2015 (see tables below).
The average deal value in the first half of 2017 was also above that seen last year, even when the biggest takeover – Abbott’s $25bn swoop for St. Jude Medical – was excluded. However, the actual number of acquisitions looks set to fall well short of 2016, suggesting either buyers are being pickier or the pool of targets is dwindling.
|Medtech acquisitions of the past decade|
|Completion Date||Value ($bn)||No of deals||No of deals with known value||Average deal size ($m)*|
|H1 2017 excluding Abbott-St. Jude||23.8||75||34||699|
|2015 excluding Medtronic-Covidien||78.0||232||103||758|
|*Includes only deals with disclosed value; Source: EvaluateMedtech.|
The latter possibility is perhaps not surprising after several years of medtech consolidation and a venture capital squeeze that has made it harder for earlier-stage companies to get funding. The latest figures could represent more bad news for start-ups, suggesting that acquirers are eschewing smaller, technology-focused deals in favour of bigger buys aimed at growing their footprint in a particular area.
A look at the top-10 purchases in the first half of 2017 supports this theory. Apart from the obvious Abbott-St. Jude buy – which made it the number-two cardiology player – other scale-building takeovers include Johnson & Johnson’s acquisition of Abbott’s eye care business and two deals from Allergan in the aesthetic surgery arena.
Indeed aesthetics, once at the fringes of medtech, is now a popular area for M&A with 10 takeovers closed in the first half. A field in which patients are willing to pay out of pocket is doubtless attractive as more traditional sectors face growing pricing pressure.
This trend looks set to continue with another aesthetics player, Syneron Medical, being acquired by Apax Partners in a deal set to complete in mid-July, while Cutera has also been touted as a potential target.
|Top 10 deals closed in H1 2017|
|Completion date||Acquirer||Target||Value ($bn)||EP Vantage coverage|
|January 4||Abbott Laboratories||St. Jude Medical||25.0||Abbott and St. Jude – it’s official|
|February 27||Johnson & Johnson||Abbott Medical Optics, subsidiary of Abbott||4.3||J&J sees a future in Abbott’s eye care business|
|February 1||Allergan||LifeCell, subsidiary of Acelity||2.9||Acelity offloads Lifecell to Allergan for $2.9bn|
|April 3||Svenska Cellulosa Aktiebolaget||BSN medical||2.9||-|
|April 28||Allergan||Zeltiq Aesthetics||2.5||Two deals in two days means aesthetics is looking good|
|January 31||Grifols||Blood screening business of Hologic||1.9||-|
|March 22||Hologic||Cynosure||1.7||Two deals in two days means aesthetics is looking good|
|January 20||Terumo||Portion of vascular closure business of Abbott||1.1||Abbott’s vascular tech is big in Japan|
|February 17||Teleflex||Vascular Solutions||1.0||Teleflex-Vascular takes 2016’s medtech merger total to $73bn|
|February 06||ICU Medical||Hospira infusion systems business of Pfizer||0.9||-|
Of course, big players will always be interested in promising new technologies, and five smaller deals by J&J should give younger companies hope, although financial details were not disclosed. With six acquisitions in total, J&J was the most prolific buyer in the first half.
|J&J’s bolt-on deals in H1 2017|
|Expandable cage technology business of Interventional Spine||Spinal surgery devices||Jan 2017|
|Megadyne Medical Products||Electrosurgical tools||Jan 2017|
|Torax Medical||Interlinked titanium beads for gastroesophageal reflux disease, or faecal incontinence||Mar 2017|
|Neuravi||Clot retrieval devices for stroke||Apr 2017|
|Sentio||Nerve localisation technology for spine surgery||Jun 2017|
Still, the mega-merger is back in vogue and it is notable that nine out of the top-10 deals in the first half were worth $1bn or more, versus only five in the first half of 2016 (Value of medtech mergers down 80%, July 7, 2016).
If deal activity continues at the same pace, 2017 could see nearly $98bn spent on medtech M&A – double last year’s total – but with only around 150 transactions, versus 234 in 2016. It seems acquirers are willing to shell out, which is good news for the lucky few – but not so much for everyone else.