Home
Distressed Businesses
  • All Distressed Businessess
  • Administrations
  • Liquidations
  • Winding Up
  • Insolvency Advice  New
Buy a Business
  • All Businesses for Sale
  • Find a Business for Sale
  • Raising Business Finance
  • Buyer Acquisition Service   New
  • Escrow Service   New
Sell a Business
  • Sell Your Business
  • List your Business
  • Seller Accounts
  • Need Help Selling?
  • Help With Finance New
  • Corporate Services  New
  • Business Valuation
  • Business Wanted Adverts
Insights & News
  • View All News
  • View All Insights
  • Exclusive Insights New
  • Video Insights
Lens
  • Search all UK Companies  New
Log in
Join Now

Home / Insights / Medtech: The rising M&A wave

Medtech: The rising M&A wave

FOR BUYERS


In a recent insight, we looked at how cybersecurity has been a sector that has bucked the M&A downturn caused by COVID-19. Following an initial dip in March, the sector’s increased relevance and its recent history of producing disruptive young companies drove dealmaking during the crisis in a trend that looks set to continue.

In many ways, medtech resembles the cybersecurity sector. They are both sectors with a mix of big, established companies and disruptive SMEs, they are at the forefront of cutting-edge technology and they all have direct relevance to life during COVID-19. What’s more, these are booming sectors that attract considerable investment from every angle, including public funding, private investment and grants.

An initial downturn

Unlike cybersecurity, however, medtech M&A suffered significantly during the initial wave of COVID-19. According to PwC, the total value of medtech takeovers tracked during the first half of the year was under $2 billion and deal volumes fell 15 per cent.

Of course, medtech is a word referring to a hugely diverse industry and there were some anomalies within subsectors. Deal volumes in biotechnology for instance increased by close to a quarter, but overall, the trend across the first half of the year was downward.

During the first half of the year, issues such as supply chain problems, a lower availability of capital, regulatory and political uncertainty and, of course, the impact of COVID-19 saw M&A drop off. Overall, many firms, whether buyers, sellers or target acquisitions, were likely more focused on crisis management, rather than M&A.

Dealmaking bounces back

Since August, however, there has been a significant upturn in medtech and life sciences M&A, with the medtech sector seeing several large deals since August, such as Teladoc’s $18.5 billion acquisition of digital health firm Livongo.

To put this turnaround in context: PwC tracked $35 billion in deals across the pharma, biotech, medical device, diagnostic and related sectors in the first 6 months of the year. In the second half of the year, this figure was surpassed in just seven weeks.

Overall, it seems that there are several factors that are driving a wave of M&A in medtech and that, in the coming months, this is only likely to get bigger. With this in mind, we’ll examine some of the contributors to what looks set to be a strong, sustained period of dealmaking.

Big players dip into war chests

The aforementioned Teladoc acquisition of Livongo was one of a slew of big deals in the medtech sector that kicked off the second half of the year, suggesting that the industry’s bigger operators were ready to flex their acquisitive muscles.

Another one of these deals, however, perhaps best illustrates the renewed appetite for dealmaking at larger companies: Siemens Healthineers' acquisition of Varian, which eventually completed for around $16.4 billion (£12.5 billion).

One interesting thing about the deal is Varian CEO Dow Wilson’s revelation that another unnamed firm came in with a similar-sized offer prior to Siemens Healthineers getting the acquisition over the line. This suggests that there are more firms out there with war chests and the appetite to put them to use.


Another factor to consider in this vein is private equity firms, who are also likely to have considerable funds at their disposal. Of course, for parties with the capital at their disposal to make acquisitions, there is likely to be no shortage of attractive targets, including cash-deficient companies at a discount.

Slimming down and re-focusing

However, not all large firms will have huge piles of capital lying around with which to hoover up distressed companies.

Many will be facing uncertainty themselves and, as such, some M&A could be driven by major companies divesting assets, divisions and even whole subsidiaries as they look to cut costs, raise capital or refocus on their core offerings.

Distressed innovators

One sub-sector in particular could provide especially ripe pickings for acquisitive companies: medical devices. Since the COVID-19 pandemic set in, elective procedures have seen a huge drop-off, fuelled by both formal government restrictions around the world and a reluctance among patients to put themselves at risk or overload healthcare systems by entering hospital settings.

This has had a major impact on companies that manufacture medical devices, many of which are small or medium-sized enterprises. This, combined with existing pricing pressures, could lead to consolidation within the sector as companies look to survive and remain competitive.

Many of these companies are highly innovative and, outside of the current circumstances, would have completely viable businesses. This will make them attractive acquisition targets, particularly as their struggles might mean they are available at lower prices.

Furthermore, sales at these companies could be set to bounce back in a big way once the healthcare industry returns to normal and the huge backlog of elective medical procedures begins to be worked through. Therefore, such companies could represent low-risk, low-cost, high-reward propositions.

Other innovative mid-size companies, such as bio-tech firms looking into oncology, cell therapy and gene therapy, will also continue to be attractive to bigger players hoping to ramp up their research and development (R&D) and technical expertise capacities as they look beyond COVID-19.

Coronavirus-concerned firms

In contrast to medical device companies that have hit hard times, companies with offerings relevant to the ongoing worldwide fight against COVID-19 have found themselves thrust firmly into the global spotlight.

Whether they are involved in vaccine development, diagnostics, the manufacture of PPE or even making ventilators, firms that can contribute to tackling the virus have seen sales and funding increase massively.

Many such companies will become acquisition targets themselves, while others may look to utilise their newfound capital to fund acquisitions of their own.

The shift to digital continues

A key feature of the medtech industry in recent years has been the drive towards digitisation in patient care and treatment as companies look to make healthcare more efficient and responsive to the needs of modern patients.

Such is the strength of the digital healthcare industry, it has proven to be one of the few medtech sub sectors which saw M&A activity only minimally disrupted by COVID-19. According to Mercom’s 1H Digital Health Funding and M&A report, the first half of 2020 saw 83 acquisitions in the digital healthcare sector, down from 91 in 1H 2019.

In the wake of COVID-19, which has seen unprecedented pressure put onto global healthcare systems, the onus on digital companies to produce technology that makes healthcare provision smoother and more efficient will be even greater and demand for their services will only grow.

As M&A accelerates across medtech, we can expect to see the small and mid-size innovators in this sub-sector continue to be sought-after targets.

At the beginning of August, HealthHero, a new digital health company backed by investment house Marcol, launched with the acquisition of Berlin-based online consultation provider Fernarzt.com.

Fernartz provides a digital service through which patients take an online health assessment questionnaire. This is then evaluated by a doctor who, if appropriate, can prescribe medication to be sent either to a pharmacy or the patient’s home.

During the COVID-19 pandemic, Fernartz saw demand for its services soar as doctors and patients alike looked to avoid face-to-face visits. The company carried out tens of thousands of remote treatments every month, whilst also adding various services, such as contactless PCR and antibody tests.

HealthHero CEO Ranjan Singh commented: “Fernarzt is a great company, with an excellent team behind it. Germany is an exciting market for digital health, and Fernarzt provides us a solid platform to build the leading player in this sector.”


Medtech has long been an active sector in M&A and, following an initial lull, it seems likely that this will only become more so as a result of COVID-19. Like cybersecurity, the sector already represents the perfect mix of innovative small and medium-sized firms and bigger companies to encourage dealmaking.

COVID-19 has added several intriguing factors into this landscape. Firstly, in the form of distressed companies that have fallen victim to the worldwide economy essentially being put on pause. Many of these companies will represent attractive acquisitions, potentially at even more attractive prices. While the flipside of this is bigger companies looking to make divestitures and slim down.

Secondly, there are those companies that have seen their stock rise due to their relevance in the face of the pandemic. These include companies working on things such as the equipment or treatments to fight the virus, as well as those companies, such as Fernartz, that could help to make the healthcare of the future more efficient in the face of such challenges.

If there’s one thing that the pandemic has shown, it’s that lives are saved when healthcare is more efficient, not to mention safer for both patients and healthcare professionals. Innovative companies on the cutting edge of medical technology have the means to help this happen and, as a result, could become even more important acquisition targets than they were in the pre-COVID-19 world.

All considered, medtech could prove to be one of the most prominent and vital sectors in the near future as M&A, and the world at large, continues to adapt to the challenges posed by COVID-19 and responds to the questions it has raised about the future of healthcare and medicine.


Share this article



Latest Businesses for Sale

Specialist Support Services For Adults
East Midlands, UK

The company provides person-centred support, progression and community integration, helping clients gain skills for living, employment and social skills.

Asking Price: Offers Invited
Turnover: £969,000

LEASEHOLD


Provider Of Roofing And Building Services
Scotland, UK

Offers an extensive range of roofing and building services, ranging from minor works to major, multi-trade construction projects.

Asking Price: Offers Invited
Turnover: £510,000

LEASEHOLD


Principal Construction Contractor
North West, UK

A highly profitable business with a lean infrastructure which maximises value from each project. Works with clients in the public, commercial, third and education sectors, carrying out a diverse range of projects, including new builds, refurbishments...

Asking Price: Offers Invited
Turnover: £1,300,000

LEASEHOLD



View more businesses for sale

Search Insights

Latest Insights

IR35 in the private sector: Could the new rules impact M&A?

INDUSTRY INSIGHTS

UK business distress at record levels – what happens when support is turned off?

FOR BUYERS

Issa brothers, TDR Capital to acquire Asda in highly-leveraged takeover

INDUSTRY INSIGHTS

Free guide: 10 Biggest Buyer Mistakes

Sign up to receive our acquisition alert emails to get your FREE guide

Email


Insight Categories

  • - For Buyers
  • - For Sellers
  • - Distressed Businesses
  • - Industry Insights
  • - Sector Guides

View all insights

Want access to the latest businesses for sale?

Business Sale Report is your complete solution to finding great acquisition opportunities.

Join today to receive:

  • Comprehensive range of businesses for sale
  • Make direct contact with business sellers or their intermediaries
  • Access to all UK administrations, liquidations and winding-up petitions
  • Daily email alerts for the latest businesses for sale & distressed notifications
  • Business Sale Report publication posted to you every month
  • Advertise your acquisition requirements on our "business wanted" section

All this and much more, including the latest M&A news and exclusive resources

Become a Member

About Us

Business Sale Report is the UK's leading independent business for sale & distressed business listing service. Established in 1995, the report offers an up-to-the-minute, comprehensive overview of businesses for sale, latest distressed business listings and daily acquisition news.

Our Services

Businesses for Sale
Distressed Companies
List a Business
Help with Finance
Buyer Acquisition Service
Small Businesses for Sale

Company

About Us
Insights
News
FAQs
Reviews
Terms & Conditions
Privacy Policy

Get In Touch

020 8875 0200
[email protected]
167 Oakhill Road, London, SW15 2QW
Working hours: Mon-Fri, 9am - 5:30pm


Sign up to our free newsletter



© 1995-2021. Business Sale Report Ltd. All rights reserved. www.business-sale.com.