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Carlsquare M&A Report 2013 – Life Science and Medtech in the DACH region

18 Fév 2014

The Medtech industry is in good shape. However, the M[&]A activities were lower and the equity funding activities higher than anticipated. Therefore, we see the exit pipeline and exit pressure for portfolios growing.

Although the number of Medtech and Healthcare Services transactions increased, overall, the number of transactions in the Life Science sector targeting DACH companies dropped by 9% from 203 in 2012 to 185 in 2013 due to the sharp decrease in Pharma/Biotech transactions, that are often seen as being riskier than Medtech and Healthcare Services transactions. In the Healthcare Services segment both the number of equity fundings and the number of M[&]A transactions increased by 15% opposed to the other two segments.

The Medtech M[&]A activities were lower and the equity funding activities were significantly higher than anticipated in 2013. We see no structural issue that explains the restrained Medtech M[&]A market. Most private Medtech companies are in good condition, have met the market expectations and have grown in 2013. Thus, the owners of private companies have no pressure to sell their businesses. This led to a backlog in the Medtech M[&]A market. Due to low M[&]A activities we see a growing exit pipeline and exit pressure for equity funding portfolios.

The total number of transactions targeting MedTech companies in the DACH region increased from 57 transactions in 2012 to 65 in 2013, with 38 transactions in Germany, 22 in Switzerland and 3 in Austria. As in 2012, more than half of the transactions had undisclosed deal volumes. Nonetheless, the median deal value of all disclosed transactions dropped by 33% to EUR 2.6 m. In 2013, there were 20 Medtech transactions with a deal volume below EUR 4 m. This number is comparably high considering a total of 63 transactions and therefore dragged down the median. Additionally, there were only four transactions with a deal value between EUR 4 m and EUR 50 m.

Only 20% of the Medtech M[&]A transactions were closed by financial investors. Financial investors seem to find it hard to become active in this space. Reasons are:

– Investment horizons of the funds are often not in line with investment cycles of the target companies

– Complex technologies and product applications make risk assessments difficult

– Pricing is typically high

In 2013, there were more M[&]A deals closed by companies located in the DACH region investing overseas, than overseas companies investing in the DACH region. The largest investment of a DACH company was the Conceptus acquisition in the USA of Bayer Health Care with a deal volume of EUR 850 m. While in 2012 DACH companies also invested globally in Brazil, Canada and Malaysia, in 2013, the focus was on European countries like France, Italy and Spain. The lack of appetite of overseas’ players may have been domestic problems in 2013.

The largest deals were the acquisition of the German manufacturer of dentist products Heraeus Kulzer GmbH by the Japanese technology conglomerate Mitsui Chemical for EUR 450 m and the acquisition of the innovative Swiss company Endosense SA by St. Jude Medical for EUR 263 m. Endosense is focusing on improving the efficacy, safety and reproducibility of catheter ablation for the treatment of cardiac arrhythmias. In 2013, we have seen no such mega deals as in the previous years. However, it is just a matter of time until the catch up of the M[&]A backlog starts.