Resurgence in MedTech M&A

After a few slow years post-pandemic, the MedTech sector is experiencing a strong uptick in dealmaking activity. These M&A trends come on the heels of solid earnings growth in the sector. This should give MedTech M&A executives a strong reason to be energized.

In 2024, MedTech stocks (S&P 500 Health Care Equipment index) grew by 18% from their lowest post-COVID value in October 2023. These stocks significantly outperformed the overall S&P 500 Health Care index, which grew at about 9% during the same period. Inflation-adjusted revenue of US MedTech companies also witnessed an approximate 6% year-over-year increase in 2024, compared with a nearly 2% decline in 2023. In 2025, US MedTech companies are expected to have a year-over-year growth of almost 3%.

MedTech M&A activity, by contrast, has been largely muted over the last few years, as companies primarily focused on enhancing profitability and leveraging divestitures to realign portfolios. 

Today, we see clear signs of a resurgence in MedTech M&A activity.

Five predictions likely to shape dealmaking

1. Margin pressures will continue to drive portfolio balancing and sell-side activity

Large, diversified MedTech conglomerates continue to face profit margin and growth pressures due to increased competition, pricing pressures, and higher regulatory compliance costs. We anticipate that they will continue to leverage divestitures and spin-offs to counter these headwinds and optimize their portfolio to enhance shareholder value.

2. M&A growth in high-growth, attractive therapeutic areas will drive deal volumes

After a slowdown in 2022 and 2023, we saw notable increases in buy-side M&A activity in 2024. This trend has continued in 2025, and we expect MedTech companies will actively search for high-growth small/mid-cap companies and innovative pre-commercial companies in higher-growth markets and therapeutic areas (TAs), such as in vitro diagnostics, cardiovascular, and orthopedic. This will be further fueled by the expected favorable macroeconomic outlook and strong cash reserves that MedTech companies have accumulated due to a flurry of divestitures or limited buy-side investments over the past two to three years.

3. Expanded M&A and venture funding toward “innovative” tech as new opportunities emerge

MedTech companies have been rapidly adopting cutting-edge/proprietary technologies (e.g., wearables and connected care, Generative AI-based solutions), which are expected to transform the sector and improve patient outcomes. These innovative technologies also have been a significant focus of venture capital (VC), and we see clear signs that traditional MedTech companies will aggressively leverage M&A to acquire these innovative technology businesses to enhance their pipeline and fuel future growth.

4. Offensive and defensive M&A tactics from incumbents as GLP-1 investments increase

Rapid adoption of GLP-1 (weight-loss) drugs has created uncertainty for MedTech companies. These pose a threat to device usage in obesity-linked conditions (e.g., sleep apnea, diabetes, orthopedics, and cardiovascular care). MedTech companies will need to leverage M&A to “GLP-1 proof” their portfolios.

5. Revived interest from private equity (PE) in MedTech given strong dry powder and attractive valuations

After a slowdown in 2022 and 2023, the MedTech sector experienced notable PE investments in 2024 with increased activity in select therapeutic areas (e.g., dental, nephrology, urology, and diagnostics). A strong dry-powder position is likely to propel further PE activity. We also anticipate more club deals in the coming months, in which PE firms partner with corporate buyers who are looking to double down on their focus in certain therapeutic areas.

Advancing your M&A journey

MedTech M&A executives have many reasons to be energized by the prevailing tailwinds in the sector. The next two to three years will provide unique opportunities to enhance patient outcomes and drive value across stakeholders. As MedTech companies look at expanding their M&A aperture to drive shareholder value, getting it right will not be easy. Executives will need to make thoughtful, strategic choices and have a longer-term view of the sector.
 
Connect with our team below to learn how we can help advise you along your M&A journey.