When Medtronic CFO and EVP Karen Parkhill looks back at the medical device manufacturer’s performance through the COVID-19 pandemic, she recalls a key decision that rankled investors but paid off in the long run.

“When I first joined Medtronic, it was shortly after the Covidien merger and we had taken on a lot of debt to do that transaction,” she said in an interview with Medical Design & Outsourcing. “The rating agencies kept our Single A credit rating because we committed to pay that debt down very quickly. When I came on board and recognized that we weren’t generating the cashflow that we anticipated to pay it down quickly, I had to turn around the fact that we needed to focus on cashflow and make sure we were generating the cash that we needed. We also made the decision to separate pieces of our patient monitoring business and sold that to Cardinal Health for $6.1 billion in cash.”

Medtronic (NYSE:MDT) investors wanted the company to use that cash to buy back stock or pay them a special dividend, Parkhill said. Instead, Medtronic only spent about 20% of the proceeds on share repurchases and used the remaining proceeds to pay down its debt.

“That was a hard decision at the time, and I got some guff from investors over it, (saying) that I cared more about debt investors than equity investors, which indeed I didn’t. I care about them both,” Parkhill said.

“In hindsight, that was the best move we could’ve made because had we not done that, we would not have been in the solid position that we were in when COVID hit,” she said. “My focus is to always keep us on very strong financial ground.”

Medtronic — the largest medical device company in the world — is still on the hunt for deals, Parkhill said. The excerpt below has been edited for clarity and brevity.

MDO: With regards to M&A, what are you looking for and where are you looking?

Parkhill: We are very focused on tuck-in acquisitions. They can be smaller, in the tens to hundreds of millions of dollars, or larger in the billions in terms of size, but they help accelerate growth of our business units and the areas that we’re in. We’ve done seven acquisitions that totaled $2.3 billion since the start of Fiscal Year 2021 (until the time of this interview in August 2021), and each of them is going to help us accelerate that growth profile that we’ve got. The growth accelerators are our own innovation and our own R&D, and that’s the largest driver of the growth accelerators. Our continued penetration into emerging markets that grow double digits is another important piece of the equation of growth acceleration. And then the third are these tuck-in acquisitions that we’re doing. We focus on organic growth (and) once we acquire we’re focused on growing what we acquire. So we’re focused on acquiring things that are accretive to our overall growth trajectory.

MDO: Are you having to look at even earlier stage companies due to all the capital out there making investments?

Parkhill: Most of what we do is early stage — we do some acquisitions that are already revenue-generating — but much of what we do is indeed early stage where things are still in development or maybe finished development, but not yet commercialized. Then we can use our expertise and the Medtronic muscle to help get it through final regulatory approval, reimbursement, and then ultimately, take it commercially around the world.

Read more from the interview in the January Leadership edition of Medical Design & Outsourcing.