Medtech M&A volume continued at a rapid pace in early 2022 with 17 transactions announced or completed — outpacing the year-to-date (YTD) total from 2021, according to a report from Capstone Partners, a middle market investment banking firm.
However, while medtech companies are taking the opportunity to enhance their portfolios and add capabilities, the report, “Medical Device Outsourcing Update,” indicates that private equity buyers are “unquestionably driving deal activity.”
“Financial buyers have accounted for 15 out of 17 2022 transactions, with several familiar names adding onto existing platform investments. Private equity firms have capitalized on healthy valuations, which has been evidenced by successful exits of their portfolio companies,” Capstone says.
The analysts point to several notable deals, including Altaris Capital Partners sale of Paramit, a developer and manufacturer of complex electronic medical devices. The company sold for $1 billion equating to ~20x EBITDA in June 2021.
“Altaris has continued to deploy capital towards the sector, entering an agreement to acquire Intricon in February 2022 for an enterprise value of $221.1 million and 21.8x EBITDA. The strong valuation environment is not only applicable to large companies. Dealmakers have noted double-digit EBITDA multiples paid for highly sought-after targets with less than $10 million in EBITDA.”
Capstone notes that strong competition for quality assets in M&A processes has been reflected in robust valuations. The report says that “strategics and private equity buyers have demonstrated their willingness to pay premiums for quality assets.”
The report finds that supply chain disruptions, labor constraints, and surgical procedure delays have severely challenged medical device OEMs through early 2022. It notes that healthcare delivery organizations continue to combat significant workforce shortages that have impacted the scheduling of elective procedures, a key revenue driver for OEMs.
Underlying dynamics such as an aging U.S. population, increasing prevalence of chronic diseases, and medical technological advancements have created a robust backdrop of demand for the medical device and diagnostics segments. The stringent regulatory landscape created a significant incentive for OEMs to outsource device manufacturing and commercialization to organizations with expertise in navigating this environment.
Editor and Director of Medical Content
For a copy of the report, go here .