There has been considerable transactional activity in the medtech space over the last couple of years, and the trend will continue unabated in 2016, if the beginning of the year is any indication.
Yesterday, investment firm Permira announced that it has entered into a definitive agreement to sell Creganna Medical, a manufacturer of delivery devices for the minimally invasive vascular surgery market, to TE Connectivity for $895 million. Headquartered in Schaffhausen, Switzerland, TE Connectivity is a global supplier of connectivity and sensor technology to a range of sectors. The acquisition will position the company as "a leading provider of minimally invasive integrated solutions in the attractive interventional segment, which has an estimated compound annual growth rate of 7% and strong margins," commented the company.
Creganna Medical is ranked among the global top 10 companies involved in medical device outsourcing, a sector that is forecast to grow at double digits through 2020, when it will reach a value of $50 billion, according to market analysts at Grand View Research (San Francisco, CA). Creganna is headquartered in Galway, Ireland, and operates design and manufacturing facilities in the United States, South America and Asia.
A significantly bigger deal surfaced earlier this month, when medical technology company Stryker (Kalamazoo, MI) announced that it would purchase Sage Products LLC (Cary, IL) from private equity company Madison Dearborn Partners for $2.775 billion.
Stryker produces an array of medical devices, but its core business is orthopedic devices used in replacement surgery. Sage develops, manufactures and distributes disposable devices targeted at preventing "never events," primarily in intensive care units. So-called never events are medical errors, such as hospital-acquired infections, that should never occur.
Also this month, medical device maker, Abbott Laboratories (Abbott Park, IL) announced that it would buy Alere Inc. (Waltham, MA) for $5.8 billion to become the market leader in rapid medical tests. "The combination of Alere and Abbott will create the world's premier point-of-care testing business and significantly strengthen and grow Abbott's diagnostics presence," said Miles D. White, Abbott Chairman and CEO. "We want to offer our customers the best and broadest diagnostics solutions. Alere helps us do that."
As noted in sister brand MD+DI, "mergers and acquisitions are a major component of the strategic growth plans of many medtech companies. They will continue to seek appropriate acquisitions to broaden their product portfolios and diversify into medical device and diagnostics areas with compelling long-term growth prospects," writes Clyde A. Burkhardt, Senior Managing Director of HT Capital Advisors LLC.
M&A activity is also driven by the need for medical device OEMs to consolidate to respond to pressure from hospital purchasing groups and healthcare systems to prune costs.