The health care industry is receiving more than its fair share of attention these days. With the implementation of the Affordable Care Act well under way and the U.S. government supporting an expanded health care system, strategic buyers and private equity firms alike are clamoring to invest in the health care sector. In fact, according to a survey conducted by KPMG LLP, 60 percent of M&A professionals working in the health care sector indicated they would do more deals in 2013 than they did in 2012. The medical device subsector, which includes a broad range of instruments and products used to diagnose, prevent or treat disease, has become a main driver of M&A transactions within the health care space. Deals involving medical devices, such as pacemakers, surgical blades and catheters, had the greatest gains in deal value within the health care industry during 2012. In the fourth quarter alone, 16 medical device M&A deals closed, representing a total value of $3.4 billion, according to PricewaterhouseCoopers.
Medical device companies have become popular with private equity investors and strategic acquirers for a number of reasons. According to ReportLinker, the value of the global medical device industry is expected to reach $228 billion by 2015, up from $164 billion in 2010, marking annual growth of nearly 7 percent. This is no surprise when considering that life expectancy has risen by nearly 20 years over the past 50 years, increasing the need for medical devices. Additionally, worldwide demographics are increasingly shifting toward older populations. Between 2000 and 2050, developed regions will see their over-60 age group grow to 34 percent of the total population, up from less than 20 percent. The aging population, coupled with lifestyle-related diseases, ensures increasing market demand for the medical device industry. Strategic acquirers are making the biggest push in the space, purchasing a wide variety of medical device companies. Flush with cash, it's a smart move for strategic acquirers to buy medical device companies rather than rely on organic growth alone, which can be slow. Strategic buyers need to stay current as the health care industry evolves under the new government initiatives, and they are finding deal flow from the venture community.