2025 MedTech M&A Trend: Carve-outs and Divestitures
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While each year is unique, I think we can all agree 2025 has been the most unique since 2020. Macroeconomic dynamics are influencing businesses across industries, and healthcare isn’t immune. In times like these, we see M&A doesn’t necessarily slow but shapeshifts.
In our line of business, of course, we’re always tuned into and excited about megamergers. They grab headlines with their size and impact on the industry and show what the big strategics are focusing on. These megamergers are often trend setters and give a pulse of what’s to come.
Of course, megamergers aren’t the only tell for the industry from the big strategics. Equally significant and strategically impactful, especially this year, are carve-outs and divestitures.
These transactions – where companies spin off, sell, or reallocate parts of their business – reshape portfolios, redefine priorities, and unlock value across the healthcare ecosystem. But divestitures and carve-outs aren’t just tactical cost-cutting measures, they represent a structural shift in how medtech leaders are positioning themselves for future growth.
A ‘one-size-fits-all’ portfolio may have its place, but through carve-outs and divestitures we see large companies become more specialized, reduce complexity in their global supply chains and operations, and lean into strategic partnerships and enabling technologies (as opposed to owning every piece of the value chain).
So why are carve-outs and divestitures surging in 2025? There are several macroeconomic and industry specific pressures pushing major medtech companies to reevaluate their portfolios.
Foremost is innovation. As the pace of innovation accelerates – particularly in areas such as digital surgery, imaging AI, and minimally invasive therapeutics – it makes sense for legacy businesses in lower-growth segments to be shed. To stay relevant, companies are prioritizing focus over diversification and shifting capital toward faster-growing, margin-accretive segments.
Shareholder and market pressure are additional forces pushing this trend. Like all publicly traded firms, public medtech companies must respond to investor demands. These demands push decision makers to focus on core strengths and return capital efficiently, especially during times of uncertainty. Divesting non-strategic assets can be an effective tool to aid the bottom line – potentially improving earnings quality and market multiples. It also sends a clear signal of discipline. For example, GE Healthcare recently divested their surgical visualization tools to a strategic buyer in efforts to streamline their portfolio to concentrate on AI and imaging.
The private equity (PE) appetite is another factor. PE firms are aggressively pursuing carve-out opportunities. Divested businesses often come with valuable assets: existing revenue, regulatory approvals, and seasoned operational teams. Divestitures can serve as foundation platforms for PE-led growth, especially in contract manufacturing, orthopedics, diagnostics, and specialty surgical devices. This year, Medtronic divested their respiratory and patient monitoring units to a Blackstone-led PE consortium, allowing them to focus capital on cardiac, neuromodulation, and diabetes. And separately, Stryker (a serial acquirer) surprisingly divested its spine business to Viscogliosi Brothers LLC, as part of the newly formed company VB Spine LLC.
There are also regulatory constraints impacting large mergers and acquisitions. Given increasing scrutiny from U.S. and European regulators on large horizontal mergers (e.g., the FTC’s block of Illumina/Grail), carve-outs offer a lower-risk way to pursue portfolio optimization and inorganic growth. Philips is currently in the process of divestiture for its connected Sleep and Respiratory Care unit. Regulatory headwinds have influenced this choice and led Stryker to focus on margin improvement and innovation redirection.
Like so much M&A, carve-outs are complex transactions. Separating a business unit from a global medtech platform can take 6 to 18 months. Despite execution challenges, many companies see these transactions as value-accretive moves freeing up working capital and increasing focus while meeting ever-evolving customer and market needs. The 2025 carve-out environment will most likely continue into 2026 and beyond. Whether driven by strategy, pressure, or opportunity, we’re excited to see how these shifts continue to shape the future of healthcare.
About the author: Estelle Black is the Business Operations Director at MedWorld Advisors. Through her leadership in pre- and post-LOI diligence activities, she facilitates M&A execution at MedWorld Advisors. Value = Strategic Fit + Timing® is a registered trademark of MedWorld Advisors.