The number of mergers and acquisitions in the medical device sector has been steady over the past three and a half years, according to research and publishing firm Irving Levin Associates’ new report The Medical Device Acquisition Report, Second Edition, 2012.
During the period covered in the report (January 2009 through June 2012), the medical device M&A market accounted for 632 transactions. The 88 deals announced in the first half of 2012 amount to about 14 percent of those deals, a level of activity that is on target to match or exceed the average number of deals transacted in each of the previous three years.
Comparing the number of transactions that were announced in the first six months of 2012 (88) to those announced in the comparable period in 2011 (89), the level of activity appears to be stable. The current year is on track to at least meet the 173 deals announced in all of 2011, according to the report.
The dollar value for transactions for the first half of 2011 was $48.15 billion compared to $14.9 billion for the first half of 2012. The drop in dollar value was primarily due to a $21 billion transaction in April 2011. However, dollar volume for the first half of 2012 exceeded the $13.9 billion reported for the entire year of 2009.
Medical device M&A dipped in the third quarter of 2012 compared to earlier in the year, but it has since rebounded nicely, said Steve Monroe, partner at Irving Levin Associates.
“We are not quite sure why the volume of medical device M&A dropped so much in the third quarter, other than the usual summer slowdown, concerns about the European debt crisis and our own uncertainty with regard to the...elections,” explained Monroe. “That said, in October, healthcare M&A volume across the board spiked up, and there were 12 medical device deals announced, compared with 19 in the third quarter.”
Although Monroe is optimistic about the future of medical device M&A activity, he believes the uncertainty surrounding the implementation of the Affordable Care Act may slow growth in the sector in the short term.
“As 2013 plays out, especially with regard to getting ready for full implementation of [the] ACA in 2014, we will begin to see the outlines of the healthcare delivery system, and the players will begin to line up to make sure they are well positioned for it. One way will be through acquisitions, but we don't really know about the timing. It does appear, however, that deal sizes in the near term will be smaller as buyers will not want to risk too much without knowing the new rules of the game,” said Monroe.