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Acquisitions Drive Global Medical Device Sector

By HospiMedica International staff writers
Posted on 13 Aug 2014
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Limited device demand is driving companies to acquire each other to boost revenues and take advantage of distribution synergies. These are the latest findings of Kalorama Information (New York, NY, USA), an independent medical market research firm.

Creativity is the name of the game in the acquisitions market. The largest example in recent times is the purchase of Covidien (Dublin, Ireland) by Medtronic (Minneapolis, MN, USA) for USD 42.9 billion in June of 2014. As a direct result, Medtronic will move its principal executive offices to Ireland, where Covidien's current headquarters resides, thus helping Medtronic enjoy tax savings resulting from relocating company headquarters to Ireland.

Another example is the acquisition of privately-held Biomet (Warsaw, IN, USA) by Zimmer (Warsaw, IN, USA) for USD 13.35 billion in May of 2014. The acquisition will position the combined company as a leader in the USD 45 billion musculoskeletal industry, and is aligned with Zimmer’s strategic plans. The combined company’s broader portfolio is also expected to help its sales force to be more effective in all geographies, increasing its ability to help physicians and healthcare systems improve patient outcomes in a cost-effective manner.

A third example is Stryker (Kalamazoo, MI, USA), which acquired Patient Safety Technologies (Irvine, CA, USA) developers of the Safety-Sponge System and SurgiCount 360 compliance software that help prevent retained foreign objects (RFOs) in the operating room (OR). Stryker also acquired Berchtold (Tuttlingen, Germany), a 90-year-old healthcare equipment company that makes surgical tables, equipment booms, and surgical lighting system.

Another driving force, not mentioned in the report, is dividend tax, which is expected to be an accelerator for future restructuring initiatives, since smaller medical technology companies will now face a longer path to profitability, forcing many of these companies to seek a buyer with deeper financial reserves, rather than face a much harder time reaching profitability on their own.

“Combining is the rule, as government spending is being curtailed in the United States and Europe, and the emerging nations can’t replace the revenue fast enough,” said Bruce Carlson, publisher of Kalorama Information. “The way to growth is to acquire, partner, and merge.”

According to Kalorama Information, the USD 300-billion plus global market for medical devices will grow by only 3%–4% in the coming five years.

Related Links:

Kalorama Information
Covidien
Medtronic 



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