• MedWorld Advisors

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 medicaldevice and medical equipment industry. Other importanttrends 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 dealsin the sector, accounting for almost 85.5% of all dealsdone 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 arosemainly 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 Corpand Boston Scientific Corpwho completed 5deals each in the Medical Devices industry in 2018.

  1. Boston Scientific Corp acquires BTG Plc

BTG has three keybusinesses, 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, andperipheral 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 advancepatient care, cancer, andpulmonary embolism. It also allows Boston Scientific Corp to realize substantial revenue and cost synergies and provide a strong return for investors.

2. 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 portfolioincludes personal blood glucose meters, testing strips, lancets, pointof 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.

3. 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.

4. 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 accurateand guided procedures. Medtronic’s acquisition of Mazor Robotics Ltd for $1.6 billion strengthens Medtronic's position in enabling technologies for spine surgery and enablesthe execution of fully-integrated procedural solution for surgical planning, execution,andconfirmation.

5. 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 itsglobal footprint.

6. Altaris Capital Partners LLC acquires Analogic Corp.

Analogic Corp provides healthcare and imaging technologies that are usedin 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.

7. 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, anddrainage 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 processedwere in the North Americanregion, specifically in the UnitedStates. Europe comes second,with a highnumber of dealsclosing in France and the UnitedKingdom.

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 offactors 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 globalmedical devices market during the forecast period. Product failures and recalls pertaining tomedical devices and the highcost of medical devices are some of the majorrisks 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 oflarge 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 acquiredduring the period. Smaller sized deals have been contemplateddue to the actionability and lack of largercustomer-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 initiatedas an R&D strategy by OEMs looking to acquire innovative technologies and expand their product portfolios. E.g.:Bridgemedica 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 oftransactions were processeddue to shiftin the regulatory statusesof target companies. E.g.:Spinal Kinetics received $105 million from Orthofix for its recently FDA approved M6 cervical disc band.

A significant increase was noticedin the number of deals being executedin 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-effectivenessof 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, ormachine intended by the manufacturer to be usedfor 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

  • Areaconsidered – Worldwide

  • Target companies – Design or manufacture instruments, equipment or machines, intended to be used for medical purposes

  • Few relevant transactions were also obtainedfrom publicly available healthcare M&A reports (Capstone, Deloitte, KPMG, Cogent, iData Research)


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