Medtech deal-making plummets in 2023

MedTech & Diagnostics News: The medtech industry, which had already experienced a lower than expected year of deal-making in 2022, is now facing an even bleaker outlook in 2023. The few mergers and acquisitions that have been finalised this year primarily involved companies divesting units rather than investing in innovative technologies. Additionally, several deals were orchestrated by private equity firms reshuffling their assets, further dampening the industry’s prospects.

Venture financings, seen as a potential lifeline for medtech companies, have also been lackluster. The amount of funding raised in the first half of 2023 is the lowest since June 2015. A mere 65 deals were struck during this period, leaving medtech startups struggling to secure necessary investments. Furthermore, the once-promising option of going public through IPOs has become non-existent, with zero medtech IPOs taking place in the first half of the year.

During the initial six months of 2023, only 42 medtech acquisitions were successfully completed, totalling a modest expenditure of $13.1 billion. If the second half of the year fails to pick up the pace, 2023 will record the lowest spending in the past decade.

Among the acquisitions that did occur this year, private equity firms dominated the scene. Bain Capital made headlines with its purchase of Olympus’ microscopy division, which the Japanese conglomerate divested in order to refocus its attention on other medical imaging technologies. Thermo Fisher’s acquisition of diagnostics group The Binding Site, the second-largest deal of the year, involved private equity firms as sellers. Nordic Capital, along with a couple of other investment groups, had acquired The Binding Site back in 2011 for an undisclosed amount.

Given the current climate of undervalued assets, it is surprising that more companies are not taking advantage of the opportunity to make strategic purchases. However, some industry observers attribute this hesitance to Illumina’s ill-fated acquisition of Grail, which is likely to be undone. The deal was completed without regulatory approval, exposing the company to significant risks that potential buyers are keen to avoid.

Nevertheless, there are glimmers of hope. The largest medtech deal recently announced is the $3.1 billion merger between orthopaedics companies Globus Medical and Nuvasive. Olympus, in its quest to acquire new businesses, divested its microscopy unit precisely for this purpose. While the company has shown interest in the Korean gastrointestinal stent maker Taewoong-Medical, its only move thus far has been a relatively modest $256 million investment.

As the industry enters the second half of 2023, all eyes are on whether medtech deal-making will regain momentum.

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