The total value of medical device mergers and acquisitions announced in the first half of 2020 was low, but the modest number of deals completed was even more striking, according to Evaluate Vantage.
Six things to know:
1. Medical device M&A announced in the first half of 2020 amounted to just over $15 billion. The two largest acquisitions announced were both in the diagnostics space.
2. Deals completed in the sector totaled less than $2 billion, even though pending mergers amounted to more than $12 billion. The pandemic has made it more difficult for companies to agree on financial and legal terms, but regulatory hurdles have also played a role in the device industry's stagnant M&A.
3. Stryker's proposed $11.5 million takeover of Wright Medical is the largest open deal, slated to close in the second half of the year. However, it has been complicated with scrutiny from the U.S. Federal Trade Commission and the U.K. Competition and Markets Authority, bringing the closing timeline into question.
4. Device company M&A in the second half of the year will depend on the prevalence and severity of new COVID-19 infections and deaths. M&A may pick up if lockdown measures are eased, with orthopedic companies as prime targets.
5. Zimmer Biomet, Smith+Nephew and other devicemakers whose businesses have suffered from elective procedure delays could diversify their portfolios by acquiring emergency trauma products, telemedicine tools or patient-monitoring devices.
6. Device companies could find it beneficial to acquire businesses in geographic areas where COVID-19 transmission rates are under control, but these targets are likely to be more expensive. On the other hand, U.S.-based companies whose shares have dropped as the country's crisis worsens will be cheaper targets.