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  • Brian Cole

Could Medtech M&A slump change in 2024?

Medtech M&A was down for the second straight year after an explosion of deal-making in 2021, with deal volumes down compared to prior years and most companies limiting themselves to sub-$1 billion tuck-in acquisitions.

Companies have closed 22 medtech acquisitions so far this year, up from 20 in 2022, BTIG analysts wrote in a report. Five deals disclosed in 2023 remain pending, according to the report, which was published before Zimvie’s announcement to sell its spine business. The activity marks “a steep slowdown from the typical pace of purchases,” the analysts wrote in a note to investors, but deal values remain “healthy.”

One of the biggest acquisitions of the year arrived in February, when Globus Medical agreed to merge with Nuvasive in a $3.1 billion, all-stock deal. Mergers of big spine companies have a poor track record, but Globus is betting that a larger combined sales presence and other consequences of gaining scale will improve its ability to compete with rivals such as Medtronic.

McKinsey analysts later made the case for a return to large medtech mergers, arguing that the rise of value-based care and digital ecosystems favors bigger companies that can be end-to-end partners to healthcare systems. The industry remained largely focused on smaller purchases in 2023, though.

The other big deals of 2023 involved life science tools and biopharma solutions. Baxter agreed to sell its biopharma solutions business to private equity firms for $4.25 billion, and Thermo Fisher Scientific inked a $3.1 billion deal to buy Olink Holding for its high-throughput protein analysis technology.

Companies continued to fill gaps in their portfolios and pipelines through smaller deals, with Johnson & Johnson and Medtronic separately moving to acquire left atrial appendage devices in recent months, but some firms have faced setbacks. Boston Scientific scrapped its $230 million acquisition of a majority stake in M.I.Tech in response to an investigation by the U.S. Federal Trade Commission, and Medtronic called off its $738 million EOFlow takeover because of alleged breaches of the agreement.

The year also saw the end of the Illumina-Grail saga more than two years after the merger was announced. Following U.S. and European regulatory challenges and an internal battle with activist investor Carl Icahn, which led to former CEO Francis deSouza’s resignation, Illumina announced on Dec. 17 that it would divest Grail.

BTIG analysts see signs that M&A activity could rebound. The average cash balance at large medtech companies now stands at around $5 billion, up $1.5 billion since early 2019, and interest rate rises may “stop and perhaps start to reverse.”

The analysts wrote that areas for potential M&A activity include mechanical circulatory support, transcatheter mitral and tricuspid valve repair and replacement, pulsed field ablation, peripheral vascular solutions, interventional devices to treat venous thromboembolism and diabetes technology.

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