Source: EP Vantage.
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The $40 billion worth of mergers and acquisitions last year in the medical device industry made it the year of the mega-merger, according to EP Vantage, with deal value more than doubling compared with 2013.
And that’s not even counting the largest merger in medtech history, Medtronic‘s (NYSE:MDT) $50 billion acquisition of Covidien, which closed in late January.
The number of initial public offerings also spiked in 2014, according to EP Vantage, the editorial arm of market intelligence firm Evaluate. There were 34 IPOs worth a collective $2.2 billion in the medical device space last year, nearly triple the amount raised the year before, according to the EP Vantage report, "Medtech 2014 in Review."
Some 7 of the 10 largest deals were worth more than $1 billion, according to the report, a sign of large-cap medtech players’ appetite for consolidation. That’s driven by the need to cut costs as pricing pressures mount from their hospital customers, according to EP Vantage.
But the focus on large buys means fewer of the small acquisitions that convince venture capitalists to back smaller firms, which in turn drive innovation in the industry, according to the report.
"There is a danger that startups might be unable to find cash, strangling potentially life-changing inventions before their development even truly begins," according to EP Vantage.
"Following the sombre days of 2013, last year saw the industry enjoy a resurgence in the merger and IPO markets, a near-doubling in FDA approvals of innovative devices and soaring company valuations on the public markets," author Elizabeth Cairns said in prepared remarks. "However, the trend towards company consolidation was not universally good news as it was partly driven by increased pricing pressures. The string of mega-mergers also shifted the focus away from smaller acquisitions, denying investors a key source of short-term returns."
