Few big bangs in a quiet year for medtech mergers
J&J's $17bn swoop for Abiomed accounted for 42% of medtech M&A spend last year.
2022 was always going to have trouble following a bonanza 2021 for medtech mergers and acquisitions. In the event, last year turned out to be the most disappointing in recent memory, at least in terms of the numbers of deals closed.
On the plus side, the total spent on buyouts was relatively healthy, and in fact surpassed that seen in three of the past 10 years. However, this was largely down to Johnson & Johnson’s $16.6bn takeover of Abiomed, which accounted for a whopping 42% of M&A spend. Without this transaction, 2022 would have looked very lacklustre indeed.
Remarkably, J&J's Abiomed takeout was the second-largest in the life sciences sector as a whole, behind only Amgen’s $28bn swoop for Horizon. Medtech megadeals on this scale do not come around all that often, so the chances of a big buyout coming to the rescue again in 2023 look slim.
There are other reasons to be cautious about this year, the consulting company EY notes in its annual M&A Firepower report. Industry-specific issues include hospital staffing shortfalls, which have made it difficult for centres to maintain procedure volumes, and have also driven up payroll costs, leading to cuts elsewhere.
The medtech sector has also been hit by broader financial worries.
Gareth Down, head of European healthcare at the investment banking group William Blair, agrees that there is unlikely to be a big rebound in medtech M&A – at least during the first part of this year.
“A lot of people at the moment are waiting for some balance to come back into the market before they make decisions on transactions,” he tells Evaluate Vantage.
How long will this be the case? “I’d like to think that as we get through the year things will ease, and volume and activity will come back normal,” he replies, pointing to the fact that companies – and the private equity community – will need deals to get done.
At least one large deal is already on the books for 2023: Thermo Fisher closed its £2.3bn ($2.8bn) purchase of The Binding Site earlier this month.
Other big groups that have expressed an interest in buying include Abbott and Medtronic, although they are mostly focused on sub-$1bn tuck-in deals.
| Top 5 deals closed in 2022 | ||||
|---|---|---|---|---|
| Completion date | Acquirer | Target | Value ($bn) | M&A focus |
| Dec 22 | Johnson & Johnson | Abiomed | 16.6 | Cardiovascular |
| May 1 | Quidelortho | Ortho-Clinical Diagnostics | 6.0 | In vitro diagnostics |
| Jan 1 | Coloplast | Atos Medical | 2.4 | Ear, nose & throat; general hospital & healthcare supply |
| Jan 1 | ICU Medical | Smiths Medical, business of Smiths Group | 2.4 | Anaesthesia & respiratory; patient monitoring |
| Feb 1 | Boston Scientific | Cardiology business of Baylis Medical Company | 1.8 | Cardiology |
The largest deal Medtronic closed last year involved the sinusitis specialist Intersect ENT, which at $1.2bn made it into the top 10. Of late, that group has been more interested in downsizing, rather than buying.
Aside from J&J-Abiomed and Quidel’s move on Ortho-Clinical Diagnostics, the other deals in the top five have been about consolidation in the hospital sector.
Average deal size was bumped up by J&J’s largesse – without the Abiomed transaction, the average takeout in 2022 was $719m, short of the mean in 2021.
Still, the overall trend towards fewer, bigger buys seen in the last few years seems to be continuing.
