M&A activity in the UK MedTech sector experienced a tough year in 2023, with economic conditions restricting much dealmaking and innovative companies in the industry facing a funding shortfall as a result of investor caution and the struggles of the NHS, which diverted key funding away from technology.
However, globally, the sector proved more resilient than most, with Alvarez & Marshal reporting just a 1 per cent drop in MedTech deal volume in the first three quarters of last year, compared to 29 per cent across all other sectors, with strategic and financial buyers still targeting MedTech deals.
Going into 2024, this resilience, combined with a number of other tailwinds, has led to a significant degree of optimism for MedTech M&A activity. The potential for economic improvement is perhaps the main factor in such positive forecasts, with the UK seeing a sharp drop in inflation towards the end of 2023, fuelling hopes that the Bank of England may soon cut interest rates.
An economic recovery could help alleviate several of the challenges that limited MedTech dealmaking during 2023, including the gulf between buyer and seller valuations, slow private equity investment and easier access to M&A financing for companies seeking to grow through acquisitions.
The ongoing pace of innovation in the sector is also seen a positive driver for future dealmaking, with a GlobalData report predicting that technologies such as Generative AI, digital therapeutics, telemedicines and wearables would drive investment during 2024.
Alongside these potential tailwinds, there are an array of other factors that could boost dealmaking this year, including growing demand for MedTech innovations due to the UK’s ageing population (which could drive additional funding into the sector) and growing incentives for owners to sell amid growing valuations and the prospect of a 2024 general election.
That being said, the challenges that the sector faced during 2023 remain, including a difficult funding environment for startup owners, ongoing difficulties within the NHS and the persistence (for now) of the UK’s high interest rates and tough M&A financing conditions. However, should the economy continue to improve, then there are plenty of factors emerging that could help to fuel a concerted increase in dealmaking.
Read more about the developments that could help to shape MedTech M&A during 2024, as well as the challenges the sector faces, in this exclusive in-depth insight
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