While the number of M&A transactions in the sector last year fell to 46 from 52 in 2021, breaking up deal activity into quarters provides evidence of an upswing.
Almost half, 20, of all medtech CDMO deals in 2022 happened in the fourth quarter, making it the busiest three-month period for M&A in Alira and MassMEDIC’s records. In January 2023, there were a record number of transactions for the first month of the year.
Based on the trends, the analysts expect deal volumes and valuations to continue “strong performance into 2023.” The report predicts that manufacturers of electronics and consumer goods may move into medtech through M&A, attracted by the sector’s potential to grow through an economic downturn.
Private equity firms are also active in medtech M&A, with the analysts tallying 40 CDMOs that are in the hands of financial owners. The analysts see opportunities for private equity companies to roll up small, founder-led CDMOs into larger service providers. Strategic buyers could come from overseas as CDMOs that have enjoyed regional success in Asia and Europe go global, the report said.
The report identifies the potential for consolidation of the sterilization market as well. As new requirements on the use of ethylene oxide take effect, “smaller, independent sterilization providers” may be unable to afford compliance, the report states. It added that some companies may go out of business, while private equity groups could combine other providers to create operations that are large enough to survive the new rules.