The perception of the medtech mergers and acquisitions (M&A) climate in North America over the past few years is very much in the eye of the beholder. While many have bemoaned the lack of blockbuster big dollar deals since the epidemic darkened our collective doorway, the more modest tuck-in or bolt-on deals have been chugging along, undetected. There's good reason to believe these 'small ball' M&A deals are going to accelerate significantly in 2025. Read on to see my narrative SWOT analysis, understand buyers' positions, and position optimally.

Overall Medtech Industry M&A Climate

  1. Increased Consolidation by Large Players: Over the past five years, we’ve seen significant consolidation among large medtech companies. These firms are leveraging acquisitions to expand product portfolios, enter new therapeutic areas, or bolster digital health capabilities. Companies like Medtronic, Boston Scientific, and Abbott have aggressively pursued deals that enhance their competitive positions in high-growth markets like robotics, diagnostics, and connected health.
  2. Focus on Digital Health and AI: Digital transformation has become a key driver of acquisitions, with a strong focus on AI-powered diagnostics, remote monitoring, and telemedicine. Large medtech firms are willing to pay a premium for companies with robust digital platforms, reflecting a broader trend toward personalized and data-driven healthcare.
  3. Private Equity and Venture Capital: Private equity (PE) firms have entered the chat in medtech M&A, targeting cash-generating mid-sized companies. At the same time, venture capital (VC)-backed startups are positioning for exits as funding rounds grow more challenging amid rising interest rates and cautious investor sentiment.
  4. Impact of Regulatory Environment: Regulatory hurdles remain a significant factor in medtech M&A. North America, particularly the U.S., maintains stringent FDA approval processes. While this can be a barrier, it also increases the valuation of companies with cleared or approved products.
  5. Valuations Under Pressure: High-interest rates and broader economic uncertainty have tempered valuations across the medtech spectrum. This dynamic could create opportunities for buyers but puts sellers, especially startups and SMEs, under pressure.

Sub-$25 Million Early Exit Climate

  1. An Underserved Market: Companies in the sub-$25 million valuation range represent a unique niche. These are often pre-commercial or early-commercial companies that may have promising technology but lack the runway to scale. Larger medtech players and traditional investment bankers often overlook this segment due to deal size.
  2. Strategic Buyers Are Key: Many early exits in this range occur through strategic acquisitions by mid-sized or regional medtech players looking to acquire innovative IP, regulatory-ready products, or niche technologies. Buyers often seek these acquisitions to fill gaps in their portfolios without the risk and expense of internal R&D.
  3. Challenges in Closing Deals: For smaller deals, buyers are increasingly selective, with due diligence focusing on clinical data, regulatory status, and reimbursement potential. Sellers must present a clear path to market, even if their product is not yet commercialized.
  4. Valuation Multiples and Negotiation Dynamics: Valuations in this segment have been somewhat depressed due to the tighter funding environment, giving buyers more leverage. However, companies with breakthrough or platform technologies may still command competitive multiples.

North America vs. Global Medtech M&A

  1. North America: The U.S. and Canada dominate the medtech M&A landscape, supported by a robust innovation ecosystem, significant VC investment, and a favorable reimbursement framework. The regulatory rigor in the U.S. acts as both a challenge and a validation factor, making FDA-cleared companies particularly attractive for buyers worldwide.
  2. Europe: European medtech M&A has also been active, with companies often acquired for their strong presence in CE-marked markets. However, the EU’s Medical Device Regulation (MDR) has increased compliance costs, putting additional pressure on smaller firms and driving some early exits.
  3. Asia-Pacific: The Asia-Pacific region is emerging as a key market for medtech M&A, driven by growing healthcare demands and the adoption of advanced technologies. However, deals here tend to focus on market entry and scale rather than acquiring innovative IP, which remains more common in North America and Europe.

Forecast for the Next 12–24 Months

  1. Continued M&A Activity, but with Selectivity: M&A activity is expected to remain robust but selective. Rising interest rates, inflation, and geopolitical uncertainty will make buyers more cautious, emphasizing high-quality assets with proven market potential or advanced regulatory status.
  2. Increased Focus on Digital and AI: Companies developing AI-based diagnostics, connected devices, and remote monitoring solutions will continue to attract strong interest as digital health becomes central to medtech growth.
  3. Opportunities for Early Exits: Sub-$25 million deals will see growth as smaller medtech firms struggle with funding constraints. Strategic buyers will actively scout for cost-effective acquisitions to bolster their innovation pipelines.
  4. Private Equity Expansion: PE firms are likely to increase investments in mid-sized companies, with some venturing into smaller deals, especially if those companies demonstrate strong technology differentiation or niche market potential.
  5. Potential Risks:
    • Prolonged economic uncertainty may slow deal velocity.
    • Increased regulatory scrutiny in key markets, particularly the U.S. and EU, could delay deal timelines.
    • Competition for top-tier assets may drive up valuations for high-performing startups, making it harder for mid-sized buyers to compete.

Why This Forecast?

  • Economic Factors: Rising interest rates make financing deals more expensive, but they also pressure sellers who may need liquidity, creating deal opportunities.
  • Innovation Drivers: The pace of medtech innovation, especially in digital health, ensures a steady stream of acquisition targets.
  • Strategic Realignments: Large medtech companies continue to prioritize acquisitions to remain competitive in high-growth areas like robotics, AI, and chronic disease management.

Overall, the next 12–24 months will offer significant opportunities for strategic and financial buyers, especially in the under-$25 million range, as smaller medtech firms face funding challenges and seek early exits. If approached strategically, this affords medtech startups the needed to push to step out of their development comfort zones and initiate an asset or equity sale via M&A, undoubtedly what had been planned all along anyway but was delayed by 'it's not quite perfect' and 'let's just try one more raise' mindsets.