Buy or Sell? A Medtech Dealmaking Guide for Turbulent Times
To view our article on the Medical Product Outsourcing website, click here.
President Trump’s international tariff tango has triggered a non-stop stream of headlines over the last few weeks, each of which has further fanned the flames of confusion and uncertainty about the levies. Consider the following story banners that appeared on CNBC’s website within a 26-hour span: “China to impose 34% retaliatory tariff on all goods imported from the U.S.” (April 4); “How Trump’s tariffs rollout turned into stock market mayhem” (April 5); “Trump’s tariffs are a ‘stagflationary shock’ that could keep hitting the market” (April 5); and “Trump says tariffs will accelerate reshoring, but experts say it’s not that easy” (April 5).
Such headlines are triggering considerable uncertainty about medtech finances and the industry’s fragile supply chain. Clearly, the Trump Administration’s tariffs could impact M&A deal volume and/or valuations this year.
In financial markets, good news drives M&A activities as optimism helps create proformas that close valuation gaps between buyers and sellers. But bad macro news makes some of these deals more challenging as confident sellers of businesses clash with skeptical buyers (particularly chief financial officers) nervous about possible deal outcomes. Once the deal is “penciled in,” however, negotiations can still occur as both sides gain clarity on the financial boundaries. In times of uncertainty, neither buyers nor sellers know what to expect because dynamics are constantly changing.
In short, good news drives M&A activity and bad news is tolerable as long as it is understood, but uncertainty is the main nemesis of growth. President Trump’s unpredictable behavior is fueling anxiety among medtech organizations and causing them to question their future projections.
With all these dynamics in play, buyers and sellers undoubtedly will question the deal-making landscape this year. They may wonder whether an M&A transaction is worth it in 2025 as well as whether or not a deal will benefit both parties. Fortunately for medtech stakeholders, mergers and acquisitions are still well worth the risk and will attract both buyers and sellers.
Is it really possible for medtech companies to reap the rewards of an M&A transaction during extreme market volatility? It is and here’s why: Medtech’s demographics allow the industry to grow despite all types of global upheaval—political or natural. Our experience in the healthcare industry has taught us that well-managed companies with innovative products will always be attractive to buyers, regardless of financial shocks or supply chain issues. The proof exists in the following examples, each of which feature a real-life illustration from our various dealmaking endeavors.
COVID-19: When SARS-CoV-2 began spreading like wildfire in early 2020, the world simply shut down for a period of time. As M&A advisors who help small- and medium-sized company owners maximize the enterprise value of their businesses, we were concerned about our seller clients and our ability to help them. However, our concerns were somewhat unfounded. The pandemic taught us a valuable lesson about the medtech industry’s strength and the risks both strategic acquirers and financial investors (i.e., private equity firms) are willing to take to find and acquire quality companies.
During COVID-19, the owners of a CDMO company who had long been entrenched in the medtech industry decided they wanted to sell their business and create a viable growth organization. By March 2020, MedWorld Advisors had already helped these business owners execute an LOI with a potential buyer who hoped to take their company to the next level. But official stay-at-home orders arrived on March 15, 2020, essentially freeze-framing the deal. Financial markets plunged for the next few months due to future uncertainty about the virus and a potential vaccine. With such instability at play, we thought the deal was likely dead but to our pleasant surprise, the industry demonstrated its resilience. Healthcare workers, obviously, were considered essential employees during the pandemic, and the products and services they offered were in high demand (remember the face mask shortage and open design plans for respirators?). Consequently, medtech companies demonstrated their current and future value for potential strategic and financial investors. M&A did temporarily slow during COVID-19’s early days, but it was truly that—just temporary. Fortunately for our client sellers, their buyer understood the value of “staying in the game” to get the deal done and closed the transaction without any loss of value.
Brexit: As COVID-19 was gaining steam, U.K. voters surprised the European Union (and the world) by passing a referendum (Jan. 31, 2020) to untangle the country from Europe’s Brussels, Belgium-based political and financial markets.
During the time Brexit was throwing the U.K.’s future into disarray, MedWorld Advisors represented an emerging digital health company based in the country. The company’s founders were extraordinary entrepreneurs and had built a valuable “tech stack” that was giving their business traction in the U.K. market and beyond its borders. Given the firm’s growth, its founders and their key venture capital type of financial backers had to decide whether to raise more capital or explore an exit for stakeholders. Obviously, the financial market challenges caused by Brexit were concerning for the company’s equity holders for either fundraising or selling. The company’s founders ultimately engaged MedWorld to explore exit possibilities, and due to the continued confidence in medtech’s future (specifically digital health), we found a new “home” for the company with a larger growing U.S. organization that needed to deploy a technical solution to accelerate its own growth. Even in uncertain times, the deal exceeded the expectations of all stakeholders.
War: Working in an international M&A service business can be very rewarding and exciting, particularly when helping non-American clients. Not too long ago, we were helping a new client (seller) from a vibrant and growing country (for confidentiality purposes, the location will remain confidential). Shortly after bringing the seller’s company to market with potential international acquirers, our client’s country was invaded.
We were grateful to represent an established, successful international medtech company in its search for a strategic acquirer/financial investor to continue its global growth. Thankfully, the company was profitable and growing, and had established a presence in many countries worldwide. Naturally, potential acquirers requested that certain contingency plans for the company be re-examined and ready in case the war in its native land intensified. We helped broker a deal despite the ongoing chaos, with stakeholder value exceeding industry averages.
Tariffs: In the three business days before this column was written, the worlds markets lost approximately $6 trillion in value. That staggering loss occurred as we entered the final stages of negotiating a letter of intent for an international M&A medtech deal. Admittedly, we took a deep breath when President Trump announced his “reciprocal tariff” regime on April 2. But due to the high quality medtech companies and extreme acquirer interest in them (both strategic and private equity financial players), we facilitated a deal that once again created extraordinary value for all parties.
With all of these dynamics in play—war, political upheaval, social unrest, natural disasters, and a looming trade war—M&A is still a viable option for company buyers and sellers in 2025. Current and future investors have good reason to be excited about healthcare’s stakeholder value this year. The medtech industry has repeatedly proven its resiliency in the face of daunting challenges, and there is no reason to doubt that flexibility now. The dynamics remain in the industry’s favor even when the going gets tough. And it looks like things might be tough for a while.
Florence Joffroy-Black, CM&AA, is a longtime marketing and M&A expert with significant experience in the medical technology industry, including working for multi-national corporations based in the United States, Germany, and Israel. She currently is CEO at MedWorld Advisors and can be reached at florencejblack@medworldadvisors.com.
Dave Sheppard, CM&AA, is a former medical technology Fortune 500 executive and is now focused on M&A as a managing director at MedWorld Advisors. He can be reached at davesheppard@medworldadvisors.com.
To view our article on the Medical Product Outsourcing website, click here.
