Will the U.S. Election Impact 2025 MedTech M&A Trends?

Oct 8

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As the U.S. presidential election nears, both long-established buyers and potentially new sellers are probably wondering about its impact on medtech M&A. Specifically, they might be questioning whether the latest bout for the White House will make it more difficult to purchase (in the case of buyers) or sell a business (for sellers) as valuation gaps could become wider.

Fortunately, both buyers and sellers can relax and make plans based on their own stakeholder objectives. Regardless of the winner, the election will not have a negative impact on medtech M&A. If anything, there may be some positive effects for late 2024/early 2025 (from tax policy, mainly) if one political party collects the necessary 270 Electoral College votes.

With Vice President Kamala Harris supporting a corporate tax hike (to 28% from the current 21%), a Democratic commander-in-chief could prompt a frenzy of seller activity by business owners, similar to the atmosphere during the last administration change in 2021.

Medtech mergers and acquisitions (M&A) have maintained a steady pace for the past several years, and this trend is expected to continue through 2025. Factors such as technological innovation, the world’s aging population, and rising healthcare costs have made the medtech sector increasingly attractive to both strategic buyers (Fortune 500 companies) and financial investors (private equity firms). Potential sellers in this space are once again at a unique inflection point, facing opportunities to capitalize on high valuations and expanding interest from multiple types of buyers. The Federal Reserve’s efforts to lower interest rates also will make it easier for buyers and sellers to conduct deals.

This column will explore key M&A activity drivers, the role of innovation, valuation trends, and ways in which sellers can maximize their value position in this competitive environment.

Key M&A Activity Drivers (Late Fall/Early 2025)

Technological Advancements and Digital Health Integration
It almost seems like 2021 again. After a slowdown in 2022 and 2023, one of the most significant drivers of medtech M&A activity is the rapid advancement in technology. Medical devices’ convergence with digital health solutions such as artificial intelligence (AI), machine learning (ML), and telemedicine is accelerating, generating solutions once deemed unachievable.
Large healthcare and medtech companies have been eager to acquire smaller players that specialize in these areas to remain competitive and maintain their technological edge.

AI’s integration into medical devices, personalized healthcare tools, and cloud-based diagnostic platforms is no longer a differentiator for large industry strategics (including many of MPO’s Top 30 members)—it has now become essential to their long-term strategies. GE Healthcare is especially active in this arena, amassing more AI-enabled medical devices than any other medtech company for three consecutive years. As of late May, the company had gained 72 U.S. Food and Drug Administration 510(k) clearances or authorizations. It will be interesting to observe how these investments affect GE Healthcare’s growth next year and beyond that.

Healthcare’s digitization is an excellent opportunity for private equity (PE) firms to buy and build portfolios of innovative companies, create synergies between them, and exit at higher multiples via sales to industry strategics in a few years. Many PE-backed deals of late are predicated on creating a synergy that may be of interest to an OEM some time in the future.

Aging Population and Chronic Disease Management
The planet’s aging population, particularly in developed markets like the United States, Europe, and Japan, is driving demand for medtech solutions that cater to chronic disease management. Devices that monitor conditions such as diabetes, cardiovascular diseases, and other age-related illnesses are at the forefront of acquisitions. The sad but profitable truth is the aging process necessitates more medical care, which creates growth.

For strategic buyers, the world’s aging population is an opportunity to expand their product portfolios and capture a growing segment of the healthcare market. For PE firms, companies in this space offer recurring revenue models and predictable cash flows, making them attractive targets for investment.

Regulatory Environment and Reimbursement Pressure
The evolving regulatory landscape, particularly in the United States and European Union, is creating a push for consolidation. As regulatory requirements become more stringent and complex, smaller medtech companies may struggle to navigate the hurdles, making them ideal acquisition targets for larger players that can absorb these costs. Similarly, reimbursement pressures from insurers and healthcare providers are leading to price sensitivity in the market, encouraging companies to scale up to protect margins and enhance their negotiating power. This trend is particularly prevalent in the European market due to the onerous impacts of the EU’s Medical Device Regulation.

For private equity investors, firms specializing in regulatory compliance or those that can streamline reimbursement processes will be in high demand. Companies that have demonstrated an ability to succeed in navigating regulatory waters and have created a viable commercial scalable model, can command premium valuations from both strategic and financial buyers.

Strategic Fortune 500 Companies: M&A Trends for 2025

Portfolio Diversification and Innovation Acquisition
Strategic acquirers will focus on targets in high margin and fast-growing segments like minimally invasive surgeries, robotic-assisted procedures, and next-generation diagnostic tools. Since it’s difficult for market leaders to cannibalize themselves their R&D is often less than effective. By acquiring cutting-edge startups and mid-sized medtech firms, large organizations can quickly bring to market new solutions and diversify away from stagnating product lines.

Synergy-Driven Mergers and Economies of Scale
Another driver for strategic buyers is the pursuit of synergies—both in terms of operational efficiencies and market reach. Large medtech companies want to consolidate smaller companies in adjacent markets to reduce costs, streamline supply chains, and gain market share. Additionally, the rise of value-based healthcare models emphasizes the need for integrated solutions, encouraging acquisitions that offer complementary products and services.

Geographical Expansion into Emerging Markets
Geographic diversification will also play a significant role in strategic M&A decisions heading into 2025 and beyond. As global players continue to “strategize globally and tactically execute locally,” they must think about acquiring regional players to serve local markets. Sometimes, it’s simply acquiring the local distributor to gain channel strength in Europe, Asia, or Latin America.

Private Equity Firms: M&A Trends for 2025

Buy-and-Build Strategies
Not surprisingly, PE firms in medtech have increasingly adopted buy-and-build strategies, where they acquire smaller companies in fragmented markets and consolidate them to create larger, more valuable entities. This trend is likely to continue, particularly in niche areas of the medical technology sector where innovation is outpacing the ability of larger companies to develop in-house solutions.

PE firms will focus on acquiring companies that can be scaled up quickly, particularly those with strong R&D capabilities, proprietary technologies, or innovative healthcare solutions. By adding complementary companies to their portfolio, PE firms can enhance their competitive position and drive higher exit multiples (often to strategics).

Focus on High-Margin, Recurring Revenue Businesses
Private equity investors are especially interested in medtech businesses that offer recurring revenue models. These include companies that provide consumables, maintenance services, or subscription-based healthcare solutions. Recurring revenue businesses are attractive because they provide predictable cash flows and are often more resilient to economic downturns. High EBITDA and/or high annual recurring revenue organizations are in high demand to PE buyers, and they are willing to pay steep multiple premiums to acquire them.

What It Means for Sellers

With all of the “dry powder” available by PE firms and industry strategics, the medtech landscape is now rich with selling opportunities, and these prospects should last well into 2025. To maximize value, sellers must strategically position themselves (with the help of a certified M&A advisor) for a merger-acquisition process that turns their opportunity into a competitive deal that is attractive to both large organizations and PE firms. Key considerations include

Preparation: Sellers should prepare for M&A by ensuring regulatory compliance, strong financial performance, and a robust R&D pipeline. Demonstrating growth, scalability, and profitability will be critical.
A tailored pitch (for buyers): Understanding the different priorities of strategic and PE buyers is essential. Strategic buyers are probably more interested in synergies, market expansion, and innovation, while PE firms will focus on scalability, recurring revenues, and growth potential.
Valuation optimization: As competition for high-quality assets increases, sellers who can differentiate themselves—whether through proprietary technology, recurring revenues, or market penetration—are more likely to achieve premium valuations.

Summary

Going forward, medtech M&A will continue to be fueled by technological advancements, an aging world population, and the need for regulatory compliance. Strategic buyers and PE firms will both be active, but with different motivations. Sellers who understand these trends and position their companies accordingly will be well-placed to capitalize on a robust M&A market for their stakeholders. If anything, the election will only stimulate more activity—depending, of course, on the political party that wins the presidency and control of the U.S. Congress.

MORE FROM THESE AUTHORS: The Secrets of Medtech Enterprise Valuation for Sellers

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.