The low rate of organic revenue growth in the medical device market and the need to innovate finds many firms buying other companies for growth, according to research firm Kalorama Information, which reported that there were more than 150 acquisitions of significance related to medical device companies in 2015 and the first half of 2016.
Medical device companies need to constantly innovate and offer better and more cost-effective devices, but acquiring a new device is only part of the reason for the mergers, the firm says. They also are seeking strategic acquisitions to fill gaps in their portfolios.
In addition, Kalorama notes a trend toward consolidation driven by the necessity to reduce costs as pricing pressures mount from hospital customers. In 2015 and early 2016, key market players were active in M&A; among them Medtronic plc, Stryker, Smith & Nephew, and ResMed.
The table in Kalorama’s full research study, available for purchase on its website, contains a select listing of 153 mergers and acquisitions that occurred during the period. In the report, the research firm cites several major medical device industry acquisitions this year and last.
Medtronic Acquires Covidien
In January of 2015 Medtronic completed the largest transaction in medtech history. The acquisition of Covidien created a company to overtake J&J’s market leadership, one having a broader product line to compete more effectively. Covidien’s business segments include medical devices, pharmaceutical products, imaging solutions, and medical supplies. Medtronic plc announced on January 26, 2015 that it had successfully completed the previously announced acquisition of Covidien plc. The transaction is valued at approximately $49.9 billion.
Medtronic Keeps Purchasing
In addition to Covidien, Medtronic has remained competitive with many acquisitions: Aircraft Medical (Edinburgh, Scotland) was acquired for $110 million in cash. Aircraft Medical is a privately held medical device company that develops affordable, handheld high-quality video laryngoscopes used by anesthesiologists and critical care professionals to intubate patients.
Twelve, Inc., Redwood City, CA, was acquired for up to $458 million, including $408 million at closing and $50 million on achievement of CE marking. Twelve, Inc. is a medical device company working to develop a transcatheter mitral valve replacement (TMVR) device.
Medical device business RF Surgical Systems, Inc. was acquired for $235 million. The Carlsbad, California-based company focuses on detecting and preventing surgical items, such as sponges, gauze or towels, from being left inside patients after surgery. RF’s system uses a low radio frequency signal embedded in towels and other surgical items that can be traced so the objects are not left behind.
The assets of Aptus Endosystems, Inc., Sunnyvale, CA, were acquired for approximately $110 million. Aptus is a privately held medical device company focused on developing advanced technology for endovascular aneurysm repair (EVAR) and thoracic endovascular aneurysm repair (TEVAR). Diabeter, an independent Netherlands diabetes clinic and research center dedicated to providing comprehensive and individualized care for children and young adults with diabetes, was acquired.
Stryker Buys Physio-Control
The maker of automated external defibrillators (AED), cardiopulmonary resuscitation (CPR) devices, and related accessories and disposables was purchased from Bain Capital Private Equity for nearly $1.3 billion, fortifying Stryker’s emergency medical services (EMS) business, in addition to several other companies.
Smith & Nephew Acquired Blue Belt Technologies
The move added robotic technology to its next-generation portfolio of surgical products. Blue Belt makes the portable Navio system, which is designed to work with eight different knee systems.
The company and Sirona Dental Systems agreed to complete a $5.6 billion merger-of-equals that will result in the world’s leading manufacturer of professional dental products and technologies. The combination will create a combined company with the largest sales and service infrastructure in dental with 15,000 employees globally.
Hill-Rom Completes Acquisition of Welch Allyn
The $2.05 billion acquisition was completed in September 2015. Welch Allyn joins Hill-Rom as part of a strategic acquisition designed to advance medical device innovation. The combination expands Hill-Rom’s product portfolio with point of care diagnostics and testing. Together, Hill-Rom and Welch Allyn will leverage their respective infrastructures and product portfolios to provide improved diagnostics, sensing and patient monitoring technologies.
Kalorama Information expects more acquisitions for the 2nd half of 2016. Its report, The Global Market for Medical Devices, 7th Edition, contains a complete list of acquisitions, as well as profiles of major companies and an index of their performance in 2015.