Private equity makes another medtech grab

At long last, the engineering conglomerate Smiths Group managed to offload its medical division this week. A subsidiary of funds advised by the US firm TA Associates has paid $2.3bn for the unit, which makes hospital equipment such as drug pumps, pulse oximeters and IV catheters. The deal is one of the largest private equity purchases of a medtech in a decade – but, judging by the 10% fall in Smiths’ share price since, investors were expecting a still higher price. It is unclear that the company could have got much more for Smiths Medical, though: the unit’s revenues are forecast to expand even more slowly than Smiths Group, which itself can only muster an annual growth rate of 4%. The sale will net Smiths an initial $1.8bn in cash with a potential $200m earnout to follow, and Smiths will retain a 30% stake in the holding company TA will create. Smiths has tried to offload the medical unit several times, most recently laying plans for an IPO in mid-2020. This was shelved last March, partly so Smiths could focus on making ventilators for the UK government as it raced to cope with Covid-19 hospitalisations. 

Top 5 private equity medtech deals of the past decade
Announcement Date Acquirer Target Value ($bn) Focus Notes
Jul 2011 Apax Partners Kinetic Concepts/ Acelity 6.1 Wound care Sold its Lifecell unit to Allergan for $2.9bn in 2016; bought by 3M for $6.7bn in 2019
Nov 2018 Veritas Capital & Elliott Management Athenahealth 5.7 General hospital & healthcare supply; healthcare IT Simultaneously merged with Virence Health, formerly a GE subsidiary
Jan 2014 Carlyle Group Ortho-Clinical Diagnostics 4.2 In vitro diagnostics Floated in 2021, raising $1.5bn
Nov 2014 EQT Partners Audiology Solutions business of Siemens 2.7 Hearing aids Renamed Sivantos; merged with Widex in 2018
Aug 2021 TA Associates Smiths Medical subsidiary of Smiths Group 2.3 Anaesthesia & respiratory; patient monitoring  Spin-off had been delayed in March 2020
Source: Evaluate Medtech, company websites.

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