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MnA ANALYSIS: 2014 outstrips 2013 in volume and value

This article was originally published in Clinica

Executive Summary

December saw 21 acquisitions pass Clinica's news desk, up from 15 during the same period in 2013, but the same volume as in November 2014.

This brought the total number of M&A deals in 2014 to 269, compared with 216 deals in 2013 and 219 in 2012.

As well as a bigger deal volume, more cash was splashed in 2014. The biggest deal of the year by far was Medtronic's $43bn purchase of Covidien; it also made history by being the biggest medtech buy ever recorded and easily dwarfed 2013's largest deal, Thermo Fisher's $13.6bn acquisition of Life Technologies. There was another M&A deal in 2014 that surpassed Medtronic/Covidien, but it was not related purely to medtech: Actavis's $66bn move for Allergan, which makes breast implants as well as ophthalmology drugs and aesthetic products like Botox.

Overall, there were more big-bucks deals in 2014, with 16 coming in above $1bn, compared with eight $1bn-plus buys in 2013.

December's biggest spending spree just broke this barrier: Philips' $1bn purchase of cardiovascular device specialist Volcano ($1.2bn including Volcano's cash and debt), giving the Dutch firm Philips entry into the minimally-invasive surgery sector.

However, the second-biggest December deal was only worth $230m upfront (plus $245m in milestones): BTG's swoop for interventional pulmonology firm PneumRx. After that, the transaction value quickly tapered off, with the fifth-biggest buy of the month, Synergetics' purchase of UK firm Sterimedix, worth only $13.5m. Sterimedix manufactures and distributes cannulas, needles and other disposable products for ophthalmic and aesthetic procedures.

Financial terms were not disclosed for the rest of the acquisitions in December (see Figure 1).

Figure 1.

The Top 5 acquisitions in December and 2014 overall are shown in Tables 1 and 2, below. Table 2 does not include the aforementioned Actavis/Allergan deal, as it is not medtech-only; we have also excluded Mylan Laboratories' purchase of Abbott's non-US specialty and branded generics business, worth $5.3bn.

Table 1. Top-five deals in December, by value

Buyer

Target

Sector

Price paid

Date announced

Philips Healthcare

Volcano

Cardiovascular

€800m ($1bn)

17/12/14

BTG

PneumRx

Interventional pulmonology

$230m upfront, $245 milestones

4/12/14

Eurofins Scientific

Boston Heart Diagnostics

IVDs

$140m upfront, $60m milestones

8/12/14

Varian Medical Systems

MeVis Medical Solutions

Diagnostic imaging software

€30m ($36m)

17/12/14

Synergetics

Sterimedix

Ophthalmology and aesthetics

$13.5m

10/12/14

Table 2. Top-five deals in 2014, by value

Buyer

Target

Sector

Price paid

Date announced

Medtronic

Covidien

Surgery

$42.9bn

15/6/14

Zimmer

Biomet

Orthopedics

$13.35bn

24/4/14

Becton Dickinson

Carefusion

Medication management

$12.2bn

5/10/14

LabCorp

Covance

IVDs/ clinical trials

$6.1bn

3/11/14

Wright Medical

Tornier

Orthopedics

$3.3bn

27/10/14

IVDs on top again

Going back to December 2014, the in vitro diagnostic (IVD) segment was again the most popular for M&A, with six deals. Cardiovascular was second, with three, while there was one apiece in aesthetics, dental, imaging, IT and orthopaedics (see Figure 2).

Figure 2.

The December IVD deals included three by Roche: first, it picked up prenatal testing specialist Ariosa Diagnostics; then it agreed to buy AvanSci Bio's tissue dissection technology; and finally it purchased Bina Technologies, giving it a foothold in the genomics informatics market. Roche did not disclose financial details for any of the deals, which made it the most acquisitive firm in December.

As usual, US companies made the bulk of both acquirers and targets (see Figure 3). December saw several OUS companies look to the US for acquisitions, including Roche, as detailed above, the UK's BTG (with its aforementioned purchase of PneumRx), Philips (with its previously outlined acquisition of Volcano), and Belgium's Eurofins Scientific, which bagged cardiovascular testing specialist Boston Heart Diagnostics for $140m upfront plus up to $60m in milestones.

Figure 3.

2014 breakdown

Figure 4, below, shows the number of deals by month throughout 2014. Figure 5 shows the value of the biggest deal each month. The spike in June is due to the aforementioned Medtronic/Covidien deal, while the jump in April was for Zimmer's $13.35bn purchase of Biomet, and October's peak was due to Becton Dickinson's $12.2bn move for Carefusion. October also saw another top-five deal, Wright Medical and Tornier's $3.3bn merger.

Figure 4

Figure 5.

As in 2013, the IVD segment was 2014's most popular market for acquisitions, with a whopping 56 deals, well ahead of the second-placed market, cardiology, with 25 deals. See Figure 6 for more details.

Figure 6.

The most acquisitive company in 2014 was Medtronic, with seven deals. As well as its $43bn mega-buy of Covidien, Medtronic also gained the remaining stake in Italian hospital service provider NGC Medical; Dutch deep brain stimulation specialist Sapiens Steering Brain Stimulation; surgical technology specialist Visualase; wireless patch developer Corventis; Turkish distributor Biostar (in which it took a majority stake); and antibacterial envelope developer TRYX.

Being an acquisition target itself did not stop Covidien from going shopping either. Together with Roche, Covidien came joint second most acquisitive company in 2014, with six acquisitions apiece.

Could 2015 eclipse the dizzy heights seen last year? There are signs that the medtech market is continuing to consolidate, as scale and breadth are increasingly critical for competing in a healthcare delivery environment where pricing pressures are relentless.

One long-rumored deal that might be on the cards is Stryker’s acquisition of UK orthopedic and wound care firm Smith & Nephew. In May, Stryker was forced to publicly deny the reports, but the six-month waiting period has now expired. This has led to more speculation that the deal is about to take place, which reached a head at the tail-end of December. Whether it comes to fruition remains to be seen.

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