Pulse of the industry: medical technology report 2013

Mergers and acquisitions: all signs point to deals

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The total value of mergers and acquisitions involving a US or European medical technology company increased 23% to US$47 billion during the 12-month period ending June 2013, in line with the average of US$48.5 billion over the past five years.

But by normalizing the data for the impact of that megadeal, the total value of M&As in 2012-13 actually fell 19% to US$31.2 billion — the second consecutive year in which megadeal-adjusted totals declined, but also in line with the five-year average of US$33.2 billion. Also, for the second year in a row, the number of transactions with values in excess of US$1 billion dropped.

M&As in the US and Europe
EY - Subheading: All signs point to deals

All signs point to deals

As has always been the case, M&As have ranged from riskier, long-term bets on breakthrough technologies to strategic “tuck-in” acquisitions. Whatever the strategy, companies continue to seek deals that hold the promise of spurring the growth they are hard-pressed to generate on their own.

The second consecutive year in which megadeal-adjusted totals declined.

This past year, a variety of buyers, both old and new, used M&As to either diversify their portfolios (e.g., Valeant/Bausch & Lomb), move them into market leadership (Thermo Fisher/Life Technologies) or open new geographies (Medtronic/China Kanghui Holdings). Several large acquirers also took advantage of the ongoing low interest rates to help finance their purchases.

US and European medtech companies have been looking at China as a source of growth.

Despite being a long-time user of favorable debt and credit markets to finance acquisitions, private equity firms were relatively quiet on the M&A front in 2012-13. However, some firms were occupied with divesting medtech assets from their portfolios.

Underlying the overall numbers, there were signs of growing interest in deals. The composition of buyers is now more diverse than in any comparable period that we have analyzed, and deal activity in China accelerated dramatically over the last 12 months.

Longer term, the outlook for deals remains bullish. At a time when access to venture capital has become more difficult and IPOs have diminished as a viable financing option, the case for an M&A exit has become more compelling for smaller companies.

Meanwhile, acquirers will need to use acquisitions to jump-start growth. While medtech companies are grappling with unprecedented pressures from regulators, payers and the overall market, all signs point to robust M&A activity in the months and years ahead.

 

 


 

EY - All signs point to deals ×