Pulse of the industry - medical technology report 2012

Mergers and acquisitions fueling future growth

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Merger and acquisition (M&A) activity among US and European medical technology companies remained vibrant in the year ended June 30, 2012.

There were eight transactions valued at more than US$1 billion, versus 12 the year before.

While 2011–12’s total of US$35.0 billion was well below the levels seen over the last two years, those two years were driven by megadeals done by Novartis and Johnson & Johnson. On a normalized basis (after removing the impact of the aforementioned megadeals), 2011–12’s total deal value was more in line with previous years — 25% below the prior year and 16% above the year before that.

The total number of acquisitions leaped nearly 20% in the year ended 2011–12. While the total number of deals has increased, the number of privately held medtech firms acquired for at least US$5 million has also remained remarkably stable over the past several years.

Financial pressures at payers and providers to cut expenses and increase efficiencies are driving medtech companies to re-evaluate their portfolios, divest underperforming or non-core business units, or acquire assets in highgrowth technologies or desirable markets — possibly leading to more M&As ahead.

M&A in the US and Europe (US$m)

United States deal size down, number of deals up

The value of M&As involving US medtech companies dropped 45% to US$30.6 billion in 2011–12 from the previous year.

However, after normalizing the data for the US$19.7 billion Johnson & Johnson/ Synthes megadeal, the total value of M&As declined by just 16%. While the average (mean) deal size fell, the median deal size remained exactly the same year-over-year at US$53 million, and the total number of M&As (including those with unannounced deal terms) edged up from 228 to 245.

European M&A trends consistent with US market

European medtech M&A fell to US$9.4 billion in 2011–12, a 40% decline relative to the previous 12-month period. This figure was not only the second-lowest M&A total in the past five years, but also 26% lower than the average over this five-year period, even with megadeals removed. However, on the positive side, the total number of deals — including deals with and without announced deal terms — skyrocketed from 122 to 184.

See more of our findings at www.ey.com/MedTechData.

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