Last year was a very strong one for transactions in the medical device space. According to a Mass Device article, the number of deals in 2014 rose 39 percent to 57 announced transactions, and deal value surged to $86 billion, up from $14 billion in 2013. Fulfilling many analysts’ predictions for an equally robust (if not better) deal year in 2015, the medical device industry has been alive with Q1 deal activity, the most recent transactions including:
- Cardinal Health Buys Johnson & Johnson’s Cordis Unit for $1.94 billion. Cardinal Health Inc. agreed to buy Johnson & Johnson’s Cordis business for $1.94 billion in cash, gaining a global manufacturer of cardiology and endovascular devices. The acquisition will be financed with a combination of $1 billion in new senior unsecured notes and existing cash, Dublin, Ohio-based Cardinal Health said in a statement. The transaction is expected to close in the U.S. toward the end of 2015.
- Boston Scientific Buys Endo Men’s Health Unit for $1.6 billion. On March 2, Endo International PLC said that it has agreed to sell its men’s health and prostate businesses to Boston Scientific Corp. for $1.6 billion, in a bid to streamline and focus instead on its core pharmaceuticals business. Boston Scientific says that the deal is expected to create a business with nearly $1 billion in annual sales, and that the deal will complement the corporation’s existing treatments for female gynecological and urologic disorders. The deal is expected to be final in the third quarter.
- Blue Wolf Takes Majority Stake in North American Rescue. Also on March 2, private equity firm Blue Wolf Capital Partners LLC announced that, through an affiliate, it acquired a majority stake in North American Rescue, LLC, a leading supplier of mission-critical tactical medical products, such as tourniquets, chest seals and decompression needles, to the military, law enforcement and EMS first responder markets. Terms of the transaction haven’t been disclosed.
There are multiple drivers behind this sustained high level of activity, including rapid consolidation in the medical device industry’s customer base. Our country’s changing healthcare model – away from fee-for-service – is also another likely motivating factor. The continuing realignment of U.S. healthcare delivery and payment incentives will reimburse based on the quality, not quantity, of care provided. Under this model, successful medical device companies will have the ability to offer hospitals comprehensive solutions that help them meet their objectives. Increasing regulatory pressures – many related to the Affordable Care Act – have also placed additional financial burdens on medical device makers, leading many to seek out mergers.
Our team is committed to helping healthcare organizations understand the catalysts behind the industry’s influential trends and sweeping transformations. Please contact a Conway MacKenzie healthcare industry advisor today to discuss the operational and financial health of your business in light of the changing marketplace, and visit us regularly on Twitter, LinkedIn and Facebook, for more insights into what’s driving deals in your space.