Medtech M&A shows growth in first half of 2014


Over the past 18 months, merger and acquisition (M&A) activity has accelerated in the U.S. That trend is poised to continue, if not increase, according to the first annual Deloitte M&A Trends report.

Of the 2,500 corporate and private equity respondents to Deloitte’s M&A survey, 84 percent of corporate executives anticipate a sustained, if not accelerated, pace of M&A activity in the next 24 months. The vast majority of private equity executives (89 percent) are expecting average to high deal activity going forward.

Several important factors have converged to create an ideal environment for corporate combinations. Companies are flush with cash — 59 percent of survey respondents said their cash piles have grown over the past two years. Meanwhile, U.S. stocks have continued to rise, providing companies with currency to initiate transactions. Furthermore, interest rates remain low, enabling companies to borrow to finance deals ahead of expected rate increases next year. And the economy, though stabilized, is expected to grow at an annual rate of only 2.5 percent to three percent through the end of 2016, according to many forecasts. In sum, companies and private equity firms appear to be turning to M&A to spur growth that exceeds the restrained economic growth rate.


Read the full Deloitte Report

It’s difficult to escape the mammoth merger of Medtronic ($MDT) and Covidien ($COV). But they’re not alone in going bigger; all of the top 5 med tech deals that were announced during the first half of this year were larger than their counterparts during the first half of 2013.

Investors have taken well to these acquisitions; most have seen a double- or even triple-digit gain in their share prices since these med tech deals were announced. The biggest share price winner by far is Illumina ($ILMN), which was already on the right track before its said it would acquire noninvasive prenatal test maker Verinata for up to $450 million; since then it’s gained 226%. The testmaker’s offerings reportedly make up 8% of Illumina revenues now.

All the stock price performance data for the acquirers is through the end of July.


The biggest bomb among the mergers during the first of half of 2014 versus those of the first half of 2013 was Bayer‘s $1.1 billion buy of Conceptus. Its nonsurgical birth control device Essure has been met with ample consumer complaints and activism since the deal. Bayer has been largely mum regarding Conceptus and declined to offer any sales figures for the device.

And it’s not just Medtronic/Covidien that shows med tech’s acquisition muscle. Every acquisition in the first half of 2014 was larger than its counterpart that was proposed during the first half of 2013. In fact, the 1H14 deals have a total valuation of $63.2 billion–while the 1H13 deals are worth just $24.6 billion in aggregate. That’s according to an analysis by EP Vantage.

Table Posted on Fierce — by Stacy Lawrence

Comparing M&A deals in the first halves of 2013 and 2014
1H 2014 1H 2013
1. Medtronic muscles in on Covidien 1. Thermo Fisher bought Life Technologies
2. Zimmer zips up Biomet 2. Valeant vacuums up Bausch & Lomb
3. Carlyle Group grabs up Ortho Clinical Diagnostics from J&J 3. Bayer doesn’t conceive with Conceptus
4. Smith & Nephew nabs ArthroCare 4. Stryker tries out Trauson
5. Cooper Companies scoops up Sauflon 5. Illustrious Illumina ventures out for Verinata