In a recent insight, we looked at how cybersecurity has been a sector that has bucked the M&A downturn caused by COVID-19. Following an initial dip in March, the sector’s increased relevance and its recent history of producing disruptive young companies drove dealmaking during the crisis in a trend that looks set to continue.
In many ways, medtech resembles the cybersecurity sector. They are both sectors with a mix of big, established companies and disruptive SMEs, they are at the forefront of cutting-edge technology and they all have direct relevance to life during COVID-19. What’s more, these are booming sectors that attract considerable investment from every angle, including public funding, private investment and grants.
An initial downturn
Unlike cybersecurity, however, medtech M&A suffered significantly during the initial wave of COVID-19. According to PwC, the total value of medtech takeovers tracked during the first half of the year was under $2 billion and deal volumes fell 15 per cent.
Of course, medtech is a word referring to a hugely diverse industry and there were some anomalies within subsectors. Deal volumes in biotechnology for instance increased by close to a quarter, but overall, the trend across the first half of the year was downward.
During the first half of the year, issues such as supply chain problems, a lower availability of capital, regulatory and political uncertainty and, of course, the impact of COVID-19 saw M&A drop off. Overall, many firms, whether buyers, sellers or target acquisitions, were likely more focused on crisis management, rather than M&A.
Dealmaking bounces back
Since August, however, there has been a significant upturn in medtech and life sciences M&A, with the medtech sector seeing several large deals since August, such as Teladoc’s $18.5 billion acquisition of digital health firm Livongo.
To put this turnaround in context: PwC tracked $35 billion in deals across the pharma, biotech, medical device, diagnostic and related sectors in the first 6 months of the year. In the second half of the year, this figure was surpassed in just seven weeks.
Overall, it seems that there are several factors that are driving a wave of M&A in medtech and that, in the coming months, this is only likely to get bigger. With this in mind, we’ll examine some of the contributors to what looks set to be a strong, sustained period of dealmaking.
Big players dip into war chests
The aforementioned Teladoc acquisition of Livongo was one of a slew of big deals in the medtech sector that kicked off the second half of the year, suggesting that the industry’s bigger operators were ready to flex their acquisitive muscles.
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