Medtech M&A leads the way into 2025!

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From our perspective in working with private equity (PE) and strategic companies in 2024, mergers and acquisitions (M&A) continues to be highly active in medtech. On the strategic side, large companies such as Stryker and medium-sized entities such as Merit Medical are leading the way with multiple transactions to date. On the PE side of the equation, many firms are focusing strictly on healthcare investments.

In 2025, strategic Fortune 500 companies and PE firms are expected to continue their aggressive pursuit of medtech acquisitions due to the market dynamics and the reduction of interest rates. Understanding these trends is crucial for medtech sellers aiming to maximize their exit value with a PE firm or finding the right strategic acquisition partner.

Selling to strategic Fortune 500 companies: Focus on innovation and synergies

1. Technological integration and innovation

Given the fact large companies are notoriously lacking the ability to innovate to disrupt themselves, Fortune 500 companies are keenly focused on acquiring innovative technologies that can enhance their existing product portfolios. These acquisitions aren’t merely about expanding product lines but also integrating new capabilities that can drive long-term growth.

For sellers, this means emphasizing how their technology complements a potential buyer’s existing offerings or helps them enter new market segments that can significantly boost their valuation – providing the seller has demonstrated the commercial viability of their innovative solutions.

2. Synergy-driven acquisitions

Large companies are always looking for additional market share and margins. Therefore, strategic buyers are also seeking acquisitions offering clear operational or market synergies. The goal is creating economies of scale, reducing operational costs, and strengthening market positioning.

To reach these companies with the highest valuation possible, more established sellers should emphasize how the combined entity could provide enhanced market access to accelerate growth rates. This can make a seller’s value proposition more compelling.

Selling to PE firms: Emphasis on scalability and recurring revenues

1. Buy-and-build strategies

PE firms are expected to continue using buy-and-build strategies in the fragmented medtech market. By acquiring smaller, specialized companies and consolidating them, PE firms aim to create larger, more valuable entities attractive to strategic acquirers or suitable for public offerings.

For sellers, companies demonstrating scalability and the ability to integrate with other potential acquisitions are particularly attractive to these investors.

2. Focus on high-margin, recurring revenue models

One of the attractive aspects of medtech is the high margins often possible. PE investors like medtech or digital health companies have high margins and recurring revenue models (disposables, annual recurring revenue, etc).

Sellers that can highlight their customer retention rates, subscription growth, and margin sustainability can help attract higher valuations from PE buyers. We know as we’ve seen it in our deals.

Implications for sellers

Due to many factors, 2025 presents a prime opportunity to capitalize on the anticipated heightened M&A activity. However, to maximize value, understanding the distinct motivations of strategic buyers and PE firms is crucial:

• Preparation and positioning: Sellers must prepare by ensuring robust financial performance, regulatory compliance, and a clear growth narrative.
• Valuation optimization: Sellers who can clearly articulate their value proposition and potential synergies are more likely to achieve premium valuations.

The medtech M&A landscape in 2025 will be characterized by aggressive acquisition strategies from Fortune 500 companies and PE firms, each with distinct priorities. Sellers who can align their strengths with the specific objectives of these buyers will be well positioned to secure favorable outcomes and maximum valuations in this dynamic market.

About the authors: CEO Florence Joffroy-Black is a long-time medtech M&A and marketing expert. She can be reached at florencejblack@medworldadvisors.com. Managing Director Dave Sheppard is a former medical OEM Fortune 500 executive and an experienced medtech M&A professional. He can be reached at davesheppard@medworldadvisors.com. Value = Strategic Fit + Timing® is a registered trademark of MedWorld Advisors.