In the last 12 months, there’s been over 1,000 healthcare related deals with values totalling several billions.

    Little wonder then that this is one of the hottest sectors for M&A activity. Andy Parker, Corporate Finance partner in the Midlands, looks at what’s driving demand and some of the key trends in the healthcare sector. 

    Johnson & Johnson’s £3.3 billion takeover of Abbott Medical Optics in February was one of the bigger healthcare deals the market has seen for some time. But while the value of the deal may have been extraordinary, the deal itself wasn’t out of the ordinary; not for a sector that in the last year has witnessed a growing number of transactions. And with rapid advances in technology and the acquisition of firms in order to acquire expertise, it is likely we will see an increasing number of deals going forward. 

    The medical device industry in particular saw a number of significant deals in the last 12 months, driven by new technological advances in areas such as robotics, 3D printing and cyber security, as well as consolidation in the market. 

    The use of robotics in medicine may sound like a futuristic concept but it’s fast becoming a reality. Medical robots allow surgical procedures to be carried out with higher levels of precision and, according to research by Markets and Markets, the industry is set to be worth $12.8bn by 2021. 

    Last year, Smith & Nephew Plc acquired Blue Belt Holdings Inc, a company specialising in robotics-assisted technologies for orthopedic surgery, for £180m to ensure that it would be a front-runner in medical robotics. 

    Another technological advancement experiencing rapid levels of growth is 3D printing. Given that the market for 3D printing in the healthcare sector is set to grow by 19.1 per cent annually until 2020, it’s no wonder big names such as Johnson & Johnson are already involved in a number of projects. 

    In January, the company announced that it would be partnering with Aspect Biosystems to create knee tissue using 3D printing that could then be used to treat knee problems in the elderly. 

    The benefit of 3D printing is that it can be utilised in a number of ways for medical applications and as more players enter the market, putting pressure on prices, the cost is being driven down. 

    While advances in medical technology are continuing to shape and evolve the healthcare sector, there are, of course, risks, such as safety and security. 

    Cyber security is a very real threat posed by the increased use of networked medical devices that transmit and receive information. If a device is networked, similar to how computers are, it can potentially be hacked into and tampered with. 

    In October 2016, Johnson & Johnson warned of a cyber security threat to one of its medical devices. As a result of this threat, we could see manufacturers collaborating with cyber security companies to ensure the protection of patients. 

    But it’s not just in the area of cyber security where we will see further collaboration between medical and technology companies in the future. 

    Google, for example, through its company Verily – previously known as Google Life Sciences – is blazing a trail in the medical device sector by collaborating with healthcare giants such as Johnson & Johnson. 

    Verily has also partnered with French pharmaceutical company Sanofi SA on a project to combat type 2 diabetes by using a combination of drugs and electronic devices. 

    Through its collaborations and innovative new products, Verily is shaking up the medical device industry. In order to compete, we could see a growing number of medical device companies follow suit by acquiring smaller firms with specific areas of expertise. 

    We have already seen examples of this with Johnson & Johnson and Smith & Nephew.  As the medical device industry continues to innovate at an astonishing rate, one way in which big organisations have been able to keep up is by acquiring smaller firms with new capabilities, effectively consolidating the market. 

    In October 2016, Cooper Parry Corporate Finance advised the shareholders of Pennine Healthcare Limited on the sale of its procedure pack division to Unisurge International Limited. 

    Unisurge specialises in the sterilisation of medical instruments. By acquiring Pennine’s procedure pack division it was able to create synergies by having the resources to create and sterilise the procedure packs, which lead to cost savings that could then be passed on when the packs are sold to the NHS, making them a more attractive supplier. 

    With the medical device industry having high barriers to entry, partially due to the costs involved in research and development, acquiring firms with the desired competencies is one way for companies to remain competitive. 

    As companies fight to retain their position in an increasingly competitive market, we are likely to see further consolidation.  


    ANDY PARKER, Partner & Head Of Corporate Finance

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