MedTech M&A: Resilience and Optimism

The medical technology (MedTech) sector responded well to the COVID-19 pandemic, with many aspects of the industry being directly responsive to the crisis, while other areas benefited from a growing interest in how technology can improve medical care. As a result, M&A remained strong in the sector at a time when most others saw dealmaking decline rapidly.

This continued during the wider M&A boom seen across most sectors during 2021 but, like many others, activity cooled in the MedTech industry as economic headwinds hit in 2022. Despite widespread sentiment that MedTech M&A would rebound, 2022’s trends have largely continued during 2023.

However, the sector has shown significantly more resilience than many others. As a result of this, as well as ongoing innovation and broader signs of economic recovery emerging at the end of 2023, there are again predictions that MedTech dealmaking will rebound strongly during 2024.

What happened in 2023?

As we’ve covered extensively elsewhere, economic uncertainty and tight financing conditions led to dealmaking activity remaining relatively quiet during 2023 and these were issues that also affected the MedTech industry.

Other factors that proved damaging to MedTech dealmaking were tightening antitrust regulations, which made buyers at the top end of the industry more cautious when it came to M&A, while companies also struggled with a lack of funding, something that has been attributed to both economic pressures and (in the UK specifically) a staffing crisis within the NHS, which has drawn funding away from innovative technologies and back into the healthcare service.

However, the industry has also demonstrated some strength. According to a report from Alvarez & Marshal, the MedTech sector saw a mere 1 per cent drop in deal volume during the first nine months of 2023 compared to the same period a year earlier – compared to a 29 per cent drop across all other sectors.

Similarly, in terms of deal value, transactions across all industries tracked in the report fell from $2.97 trillion in 2022 to $2.1 trillion in 2023 – again a 29 per cent drop – whereas MedTech again saw a decrease of around 1 per cent in deal value.

Alvarez & Marshal attributed this to continued interest in smaller and medium-sized transactions by both strategic and financial buyers. According to the report, larger MedTech firms, in particular, have been targeting acquisitions of innovative small and medium-sized businesses in order to expand product offerings, tap into new innovations and new technologies, diversify their supply chains and enter new markets.

This reflects a wider trend beginning to take shape elsewhere in M&A, as companies recognise the value of M&A in delivering rapid change and helping them to adapt more effectively to the widespread transformations sweeping their industries.


One UK MedTech firm that has been using M&A to grow is Doccla, a virtual ward technology provider based in London. In August 2023, the company announced the acquisition of OpenTelehealth, a universal cloud-based remote patient monitoring platform.

OpenTelehealth enables patients to measure their health data at home using an app, with Doctors then able to view and monitor this data through a web portal. For several years prior to the acquisition, Doccla, which was founded in 2019, has used OpenTelehealth’s technology.

Prior to the deal, Doccla was already the leading virtual ward provider to the NHS and was present within many NHS trusts across the UK. However, the acquisition takes the company’s growth to a new level, immediately expanding its presence into 13 countries (including 10 in Europe), with close to 10,000 patients under active monitoring.

The deal puts the company in business with several major companies that are among OpenTelehealth’s clients, including Siemens Healthineers in Scandinavia and TeleCare North – Denmark’s biggest telehealth programme.

Commenting on the deal, Doccla CEO and co-founder Dag Larsson said that OpenTelehealth had been “a terrific and valuable partner since our founding” and that the acquisition “means we can move at an even greater pace - to the benefit of patient outcomes across Europe.”

Larsson added: “We are now Europe’s leading virtual hospital and are looking forward to continuing to positively impact patient outcomes across the continent.”

There were also signs, towards the end of the year, that M&A activity in the sector was starting to pick back up again. According to GlobalData’s Medical Devices Industry Mergers and Acquisitions Deals by Top Themes in Q3 2023 report, M&A volume in the medical devices market increased by 17 per cent in Q3 2023 compared to Q2.

GlobalData also reported towards the end of the year that MedTech company valuations had exceeded pre-pandemic levels. While this will not necessarily lead to greater deal volume, due to a potential drop in cheaper assets, it does point to a more sustained recovery in the market, potentially laying the groundwork for a concerted increase in dealmaking during 2024.

Ultimately, despite the issues that the sector has endured during 2022 and 2023, the UK’s MedTech sector - built around the “golden triangle” of Cambridge, London and Oxford” - remains a world leader and this has continued to drive significant M&A activity into the sector from overseas, with the UK in general remaining an attractive destination for international dealmakers.


A particularly notable recent example of this was the acquisition of UK medical device firm Lightpoint Medical and its radio-guided surgery business SENSEI by Australian firm Telix for an upfront consideration of $20 million (around £15.7 million) with an earnout worth up to $15 million (approx. £11.8 million).

Lightpoint Medical is a leader in precision-guided robotic cancer surgery, developing and marketing miniaturised imaging and sensing tools used in advanced intra-operative cancer detection.

The deal significantly bolster’s Telix’s late-stage urologic pipeline and strengthen the firm’s capabilities in deploying molecular imaging in a surgical environment.

Post-acquisition, Telix will initially aim to align SENSEI with its own Illuccix®/TLX599-CDx[1] programs for prostate cancer. There is also scope for SENSEI to be expanded into advanced surgical radiation detection probes for other malignancies, both urologic and non-urologic.

Following the acquisition, Telix Managing Director and Group CEO Dr Christian Behrenbruch said: “The acquisition of Lightpoint Medical and its highly talented medtech team brings a compelling commercial-stage approved product to support and enhance Telix’s capabilities in deploying molecular imaging in the surgical setting. This strategic acquisition is in close alignment with our vision to innovate and partner with physicians at every step of the patient journey, with an initial focus on urology.”

M&A tailwinds beginning to emerge

Economic normalisation can improve dealmaking environment
Like many other sectors, one of the biggest hinderances that MedTech M&A faced in 2023 was the economic uncertainty that has created a repressive M&A environment, with financing conditions tight amid high inflation and a significant disconnect between buyer and seller valuations.

By the end of 2023, however, there were indications that these challenges were beginning to ease. Following 14 successive increases, interest rates have been kept level during the Bank of England’s past two decisions.

More recently, the UK has seen a sharp decrease in inflation. In late 2022, following former Prime Minister Liz Truss and Chancellor Kwasi Kwarteng’s “mini-budget”, inflation hit a 41-year high of 11.1 per cent. By November 2023, however, this had fallen sharply to just 3.9 per cent.

This has fuelled hopes that the Bank of England may begin decreasing interest rates sooner than expected. This will spur major investors such as private equity firms, which since 2022 have remained fairly reticent about deploying the vast sums of capital they have amassed over recent years, to re-enter the MedTech market.

The rate of technological innovation and disruption that define the MedTech industry have long made it a highly attractive destination for private equity investors keen to capitalise on the latest trends and, with 2024 forecast to see a major increase in PE activity, MedTech could be one of the first sectors to benefit from this.

As well as helping to encourage private equity-fuelled dealmaking, an improvement in M&A financing conditions will also make it easier for smaller and mid-sized industry firms to access the funds required to grow, adapt and tap into new technologies through dealmaking.

Finally, economic improvement should also see buyer and seller valuations become more closely aligned, helping to unleash existing dealmaking appetite that has been repressed by gulfs in asking prices and encouraging more owners to come to market given the likelihood of a more profitable sale.

Liam Arthur, a London-based M&A partner at Proskauer says: “Having emerged from the challenges of the COVID-19 pandemic, many healthcare companies are looking to grow again through M&A, while financial sponsors are sitting on record amounts of capital which they need to deploy, so the hope is that as interest rates stabilise and financing eases, some of that pent-up demand will be unleashed and we will begin to see a rebound.”

Technological advances will drive deals
During 2023, the ongoing pace of technological innovation in the MedTech sector was cited by Alvarez & Marshal as the key to the industry’s resilience in a challenging economy. Going into 2024, innovation within the sector is predicted to be a major contributor to improved dealmaking activity in what should be a more conducive environment for M&A.

In areas such as digital technology and generative AI (Gen AI), new innovations from both established industry players and disruptive smaller firms are widely expected to attract considerable investment, both from private equity firms and major companies within the sector, both of which will be looking to use M&A to tap into the latest developments ahead of their competitors.

A report from industry publication MedtechDIVE cited analysts from BTIG who stated that the largest MedTech companies are sitting on an average cash balance of around $5 billion (£3.94 billion) and may be tempted to bring these reserves to the M&A market as economic conditions improve.

According to the analysts, these major firms will be targeting acquisitions in areas such as “mechanical circulatory support, transcatheter mitral and tricuspid valve repair and replacement, pulsed field ablation, peripheral vascular solutions, interventional devices to treat venous thromboembolism and diabetes technology.”

As they look to add capabilities in these areas, acquisitions of smaller innovative companies will represent both the quickest and most efficient means of fulfilling their strategic aims. With larger companies seemingly lining up to bolster their offerings through acquisitions in 2024, there could be intense competition to acquire the most innovative firms, driving dealmaking volume and value and providing further incentive for company owners to consider a sale.

According to a recent GlobalData report, meanwhile, GenAI is the most prominent long-term tailwind for both innovation and investment in the MedTech space. The report stated that, despite still being in its infancy, GenAI is being forecast to deliver greater efficiency, improve patient outcomes and reduce the pressures facing healthcare professionals.

The report also identified product manufacturing as another crucial area of the MedTech industry that will benefit from advances in GenAI, writing that the technology " can aid with automated development tools that can come up with new ways to design treatments, as well as accelerate time to market for physical products.”

Beyond GenAI, GlobalData cited telemedicines, digital therapeutics and wearables as areas of innovation that would drive investment during 2024, saying that these markets were highly lucrative, with uptake booming and new devices coming to market at an accelerated rate.

All of these advances will provide opportunities for acquisitive companies to bolster their own offerings through strategic acquisitions, with GlobalData concluding: “With new technologies disrupting the space, the time is now for industry to build a lasting strategy around growth and resilience.”

Macro factors will spur further innovation
As well as innovations that are already taking place, there are medical conditions and challenges that point to the need for further innovation and could help to drive further advances and investments.

One of the key challenges facing MedTech companies worldwide is the ageing population. In a recent report, Health Tech World said that over the next 25 years, the number of people in the UK older than 85 will double to around 2.6 million.

As people become older and their needs become increasingly complex, the demand for healthcare services and innovations in medical technology becomes greater – with a survey cited by Health Tech World revealing that 90 per cent of NHS staff consider innovation to be vital in improving healthcare and tackling patient backlogs.

Against this backdrop, innovation has been accelerating, with more than 15,000 new MedTech patents filed with the European Patent Office in the UK and Europe per year. Furthermore, there is a growing level grant of funding, accelerator programmes and other investment initiatives looking to help drive innovations.

A key challenge that innovative MedTech companies in the UK have faced in recent years is the growing strain on the NHS, with the COVID-19 pandemic, doctor and nurses strikes and huge patient backlogs diverting crucial government funding away from innovation and towards propping up services in hospitals.

However, these factors are starting to be less pronounced, with hospitals recovering from the pandemic and the possibility for resolutions to industrial disputes as economic conditions improve during 2024. This could mean more investments being made as the onus shifts once more towards innovation.

GlobalData’s MedTech outlook for 2024 stated: “Following the pandemic, hospitals are also returning to normalcy and there is a renewed focus on creating the smart hospitals of the future. The positive sentiment in MedTech means there are many opportunities for companies to continue innovating.”

While these issues facing the NHS are beginning to ease, opening up the likelihood of even greater funding for MedTech startups, the challenges are still apparent. As a result, targeting investments from bigger companies or acquisitions from buyers able to fund research and innovation could be an invaluable means for disruptive MedTechs to continue developing their products and services.

Owners have growing incentive to sell
As mentioned above, economic recovery should lead to improved M&A financing conditions and an easing of the valuation gaps that have hindered dealmaking, meaning that owners who have been considering a sale (plus others who perhaps haven’t been considering an exit) may choose to act during 2024.

Amidst these improved conditions for sellers, there are also several other factors that could lead owners at smaller and mid-sized MedTechs to seek a sale during 2024, increasing the number of businesses coming to market and the acquisition opportunities available to a re-energised pool of buyers.

While a potential economic recovery is universally seen as a net positive for the MedTech industry, Alvarez & Marshal point out that investment into the sector has proven relatively resilient during the downturns seen over the past 18+ months and that an economic improvement could see a greater level of investment being funnelled elsewhere.

The report claimed: “These improvements in general economic conditions could divert capital towards non-MedTech assets, as other sectors more dependent on favourable economic conditions become attractive once again and PE firms look to diversify their portfolio across sectors.”

According to Alvarez & Marshal, this could contribute to an uptick in exit planning among MedTech owners, as they seek to attract buyers or investors the funds required to keep their businesses innovative and competitive.

Another factor cited by Alvarez & Marshal, and one seen as potentially contributing to a wider increase in UK M&A activity, is the prospect of the 2024 general election. Elections are often preceded by an increase in dealmaking, as owners with an eye on the exit door seek a sale prior to any potential changes in economic policy.

This is particularly pronounced this time around, however, given the likelihood of Labour displacing the incumbent Conservative government at the coming election and the potential for significant tax increases – especially Capital Gains Tax (CGT).

While neither of the major parties has yet set out a solid economic policy for if they form the next government, a Labour win would come with a heightened probability of tax increases. So far, Labour has sent mixed messages with regards to CGT, with Shadow Chancellor Rachel Reeves saying the party would not seek to increase the current rate that owners pay when disposing of assets, but Deputy Leader Angela Rayner saying that a wide range of potential tax increases would be considered.

Ultimately, even if there is no indication of major changes, the uncertainty created by a general election and the prospect of a completely new government may lead to many owners (for example, those planning for retirement) looking to secure a sale prior to any tax changes being risked.

Funding gap presents barrier to innovation, while headwinds remain

While the end of 2023 has shown signs of an improvement in economic conditions and optimism for a recovery in MedTech M&A, there is no doubt that there are still significant headwinds remaining, with interest rates (for now) still high, financing conditions tight and valuation gaps still apparent for now.

Looking specifically at the UK, there is still the ongoing issue of the pressures impacting the NHS, which continues to face staff shortages, big waiting lists and ongoing industrial action. While there is hope that 2024 will bring progress on these challenges, they could still provide a significant hurdle to the MedTech industry.

According to GlobalData, the ongoing crisis in the NHS means that funding will continue to be diverted away from technology and towards stabilising the healthcare services. This could prove a particular issue for smaller MedTech companies, which are often among the most innovative and disruptive and, due to being frequent targets for bigger firms and investors looking for emerging technologies, are a key driver of M&A activity in the sector.

Despite ongoing innovation within the sector, there have been warnings that declining investment in early-stage MedTech could threaten the success of startups in the sector and ultimately hinder innovation and new products being brought to market.

Health Tech World has reported that, despite a 67 per cent increase in Series B+ MedTech in the UK since 2017, investments in early stage UK MedTech has fallen 21 per cent since 2016, indicating a growing risk aversion among investors.

According to the report, the disparity between Series B+ funding for more established MedTechs and funding for those seeking seed and Series A funding “highlights the graveyard in medical innovation at the critical stage of getting products to market.”

Health Tech World points out that founders at MedTech startups face an incredibly difficult environment, with high costs for research and development (R&D) and clinical trials, increasing regulatory requirements and difficulty in judging timelines (such as when products are ready to be brought to market) and forecasting uptake.

This confluence of pressures and uncertainties is potentially discouraging investors from taking the risk of investing in early-stage MedTechs, preferring established firms that offer proven technologies and more reliable revenue streams. This means that potentially innovating firms face huge challenges to access the funds they require to develop a promising product into a product ready to be brought to market.

Health Tech World adds: “Understandably, to invest confidently and successfully in this space requires deep expertise and extensive networks to unlock innovation. And this expertise is thin on the ground – with a grand total of 0 specialist early stage MedTech funds in the UK and only a handful across the EU and US. It is the lack of specialist expertise to identify, evaluate and build strong portfolios in this space that is driving the equity gap, deepened further by the lack of specialist skills to support MedTech innovations to land and grow.”

If innovation is stifled by a lack of funding, then startups and other smaller and mid-sized MedTechs may struggle to stand out, which could prove fatal for their hopes of attracting a buyer at a time when many bigger companies will be seeking to adapt and grow through M&A activity.

Given the competition for investment, smaller firms must not neglect the importance of IP. One might presume that firms in this sector would never relegate IP assets to the status of an optional extra, but that would be a mistaken view. An effective IP strategy signals ambitious but shrewd vision to investors and partners, which will inspire confidence. Expenditure on securing IP assets, including patents and trademarks, at every stage in the firm’s evolution is a long-term investment that will pay off through lessening competition, and at the point of raising money or finding a buyer.

Clearly, the MedTech sector is one that (like many others) still faces significant challenges, both in terms of headwinds within the industry itself and as a result of broader economic factors. These challenges seem to be particularly acute among early-stage companies – which is worrying, as these are often the firms that drive the latest innovations.

However, the sector has proven more resilient than most during what has been an incredibly difficult year or two for UK businesses and there is a palpable sense of optimism heading into 2024. Innovations in areas such as GenAI are ongoing, while falling inflation has provided hope that the main barriers that have impacted dealmaking can be resolved during the coming year, helping to facilitate deals that have so far been frustrated and luring in the new investment required to drive fresh M&A activity.

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