Analysis : MedDevices M&A Transactions 2018
The global medical device market is expected to reach an estimated $409.5 billion[1]by 2023, and it is forecast to grow at a CAGR of 4.5% from 2018 to 2023.
Technologies such as digital solutions, cloud solutions, remote care, and telehealth are few innovations driving the growth of the medical device and medical equipment industry. Other important trends propelling the growth of this sector are a rise in chronic diseases, demand for smaller and portable devices, and government support for technologically superior devices.
M&A Analysis
The median EV/EBITDA multiple stood at 16.9x, but it is based on only two deals which disclosed this information and hence, is not a good representative of the whole dataset. The median EV/Revenue multiple for the same dataset was 4.62x.
Strategic buyers (142 deals) accounted for the lion’s share of the volume of deals in the sector, accounting for almost 85.5% of all deals done while financial buyers (24 deals) accounted for just above 14.5% of all deals.
[1]“The global medical device market is expected to reach an estimated $409.5 billion” – PR Newswire
[2]Boston Scientific Corp Press Release
[3]Platinum Equity Press Release
[4]Zoetis Press Release
[5]Medtronic Press Release
[6]Stryker Press Release
[7]Analogic Corp Press Release
[8]Reuters Press Release
Most of the fund flows within the Medical Devices sector arose mainly from high-value deals of 2018. The top 7 high-valued deals amounted to $12.0 billion.
The most acquisitive companies in the sector were Stryker Corp and Boston Scientific Corp who completed 5deals each in the Medical Devices industry in 2018.
Boston Scientific Corp acquires BTG Plc
BTG has three key businesses, of which, its interventional medicine portfolio is the largest encompassing several peripheral interventional product lines. One such highly differentiated product is its EKOS Endovascular System(first device cleared by FDA for the treatment of pulmonary embolism) which breaks down blood clots to restore blood flow in patients with pulmonary emboli, deep vein thrombosis, and peripheral arterial occlusions. The acquisition of BTG Plc by Boston Scientific Corp for $4.2 billion will expand the acquirer’s capabilities in areas of unmet needs such as advance patient care, cancer, and pulmonary embolism. It also allows Boston Scientific Corp to realize substantial revenue and cost synergies and provide a strong return for investors.
Platinum Equity LLC acquires LifeScan, Inc.
LifeScan produces and markets blood glucose monitoring systems for home and hospital use under the global brand OneTouch®. The OneTouch portfolio includes personal blood glucose meters, testing strips, lancets, point of care testing systems and integrated digital solutions. The products under this brand impact the lives of a large diabetes population. Platinum Equity acquired LifeScan for $2.1 billion to support and tap the potential the brand offers.
Zoetis Inc, acquire ABAXIS, Inc.
ABAXIS, Inc. is a recognized player in the development, manufacture, and marketing of diagnostic instruments for veterinary point-of-care services. The company’s VetScan portfolio of handheld diagnostic instruments and consumables serves a large customer base of veterinary practices in North America and is expected to grow in international markets. The acquisition of ABAXIS, Inc. for $2 billion provides Zoetis Inc., with a growing diagnostic platform that can be supported to accelerate the U.S. and worldwide with acquirer’s global scale and direct customer relationships in approximately 45 countries.
Medtronic Plc acquires Mazor Robotics Ltd.
Mazor Robotics is a manufacturer of robotic guidance system for spine surgeries. Mazor's proprietary core platform technology, including the Mazor X(TM) Robotic Guidance System (Mazor X), and the Renaissance Surgical-Guidance System (Renaissance), are transforming spinal surgery from freehand procedures to accurate and guided procedures. Medtronic’s acquisition of Mazor Robotics Ltd for $1.6 billion strengthens Medtronic's position in enabling technologies for spine surgery and enables the execution of fully-integrated procedural solution for surgical planning, execution, and confirmation.
Stryker Corp acquires K2M Group Holdings, Inc.
K2M Group provides spine and minimally invasive solutions globally. The company’s broad product portfolio and robust pipeline complement Stryker’s significant presence in the spine and neurotechnology markets. The acquisition of K2M Group Holdings by Stryker Corp for $1.4 billion helps Stryker Corp in offering innovative solutions to the customers and simultaneously expands its global footprint.
Altaris Capital Partners LLC acquires Analogic Corp.
Analogic Corp provides healthcare and imaging technologies that are used in CT and MRI scans, as well as automated threat detection systems for aviation security. The acquisition of Analogic Corp by Altaris Capital Partners for $1.1 billion was a result of the Analogic Board initiating a review of strategic alternatives to maximize stockholder value, immediately and substantially.
Shandong Weigao acquires Argon Medical Devices, Inc.
Argon Medical manufactures and sells single-use specialty medical devices for procedures. Its product portfolio mainly consists of biopsy products, vascular clot management devices, and drainage catheters, among others. Weigao acquired Argon Medical for $850 million in anticipation of diversifying its revenue stream to increase the contribution of sales from overseas markets. Argon Medical would also benefit from the Chinese company’s sales and marketing network to expand its business into smaller cities in China.
The highest number of deals processed were in the North American region, specifically in the United States. Europe comes second, with a high number of deals closing in France and the United Kingdom.
There seems to be some seasonality in the Medical Device sector for 2018. Q2’2018 witnessed the highest number of transactions (56 deals) which contributed to 1/3rd of all the deals executed in 2018. Independently, April and October experienced the highest number of deals closed at 25 and 22 deals respectively.
Key Industry Trends
A number of factors substantiate the growth of the Medical Device industry in the future –
Convergence of new technologies, innovation, informatics, robotics, biologics, and gene therapies
The global aging population and a growing middle class (around the world, but especially in Asia and other developing countries)
Private equity and strategic OEM buyers continuing to compete for assets in all sectors of medical contract manufacturing, and OEMs broadening their portfolios or investing in new technologies in an already served area
Increasing healthcare expenditure is expected to enhance the research and development of medical devices that would contribute to the growth of the global medical devices market during the forecast period. Product failures and recalls pertaining to medical devices and the high cost of medical devices are some of the major risks faced by global medical devices market during the forecast period.
It is evident from the top deals in the space that most transactions were executed to acquire an innovative, proprietary and widely used technology/device developed by the target company. A number of large firms were noticed acquiring smaller firms to optimize the advanced technology offered by them. E.g.: ABAXIS, Inc.
Target companies showcasing prime assets, robust balance sheets and high growth were also acquired during the period. Smaller sized deals have been contemplated due to the actionability and lack of larger customer-base for the acquirer. E.g.:K2M Group Holdings Ltd.
M&A activity was robust among contract and OEM manufacturers in 2018. Few deals in the sector were initiated as an R&D strategy by OEMs looking to acquire innovative technologies and expand their product portfolios. E.g.: Bridge medica LLC
Milestones pegged to U.S. Food and Drug Administration and other significant regulatory body approvals are always highly valued by acquirers in the space. A number of transactions were processed due to shift in the regulatory statuses of target companies. E.g.: Spinal Kinetics received $105 million from Ortho fix for its recently FDA approved M6 cervical disc band.
A significant increase was noticed in the number of deals being executed in the European region. A larger emerging market from Latin America and Asia-Pacific regions was expected but was quieted down due to lack of cost-effectiveness of products.
Click here For a complete list of 2018 Medical Devices Transactions
Methodology
Healthcare is a sector experiencing a high number of mergers and acquisitions, every year. Medical Device is defined for the purpose of this analysis as any instrument, apparatus, equipment, or machine intended by the manufacturer to be used for diagnostic, therapeutic or specific medical purposes. It is used to diagnose, prevent, monitor, and treat medical conditions. Medical devices vary according to their intended use and indications, ranging from class I devices such as bandages and stethoscopes to class III devices such as pacemakers and defibrillators. To determine the trend of M&A in the Medical Devices sub-sector, the following methodology was adopted –
Source – FactSet
Deal completion date – 2018
Area considered – Worldwide
Target companies – Design or manufacture instruments, equipment or machines, intended to be used for medical purposes
Few relevant transactions were also obtained from publicly available healthcare M&A reports (Capstone, Deloitte, KPMG, Cogent, iData Research)
