Last year had highs and lows, golden moments, and tough times. So many opportunities! One trend expected to make a comeback is mergers and acquisitions (M&A). M&A was a trend expected to surge in 2024.

It didn’t. However, we expect medtech M&A to grow in 2025. Although M&A increased marginally in 2024 after going into the valley of death in 2023, the deal volume was below expectations due to ugly market obstacles. A challenging regulatory environment (we expect this to change in 2025 with the new administration), higher interest rates, and other factors stalled the largest deals valued at over $40 billion. We expect private equity firms to increase their M&A activity, particularly on the sell side, as they seek to monetize investments and raise new funds.

Other drivers include maturing technologies like surgical robotics, which is getting a boost from AI to enhance precision and efficiency in minimally invasive procedures.¹ New technologies like personalized medicine that leverage genomics and biotechnology to shape treatment plans to individual genetic profiles are expected to be an enormous driver in healthcare. A big change for the medical device industry will be seen in changes in the global population. Elderly people living to 80, 90, and 100 years old (and beyond) will present with unmet needs that are changing faster than ever before.² 

For example, many implants include a lifespan or longevity feature.³ For patients living to older ages, hip and knee replacements are among the most common elective surgeries and are now routinely performed for patients who are 80 years old or more.⁴

Why This Is Important

We expect 2025 deals to be larger and more common than 2024 or 2023. The damper on M&A intensity since 2022 was driven by higher interest rates, leading to increased borrowing costs and reduced corporate valuations. This resulted in healthcare funds delaying exits, followed by constrained supply. Investment is needed from private equity and venture capital’s $2.6 trillion in uncommitted capital (as of July 2024).⁵ There is an ever-increasing inventory of aging private equity-owned assets that need to be monetized (Table 1). Also, with election uncertainty behind us, management teams are feeling less risk-averse.

Through Nov. 15, 2024, there were 1,373 health services deals (an adjacent space to medtech) during the year compared to 1,506 (2023), 1,708 (2022), and 1,525 (2021). Prior to that, there were 814 (2020) and 828 (2019).⁷

In a 2024 Deloitte survey of 150 C-suite members from life sciences, including medical device manufacturing companies across the United States, EU, and Asia, executives shared feedback on our industry’s concerns and priorities.⁸

One priority is to ensure acquisitions align with corporate strategies. Over the years, M&A activities have been a reliable source of innovation for medtech companies. For example, Medtronic’s acquisition of Mazor Robotics enabled the integration of Mazor’s advanced robotic systems into Medtronic’s surgical offerings, improving surgical precision and clinical outcomes in minimally invasive surgeries. Nevertheless, acquisitions don’t always meet expectations. Clinical trial design, integration challenges, FTC judgements, and strategic incompatibility can reduce intended benefits. 

Interestingly, 30% of medtech CEOs in the Deloitte survey said they would consider new medtech modalities and platforms, and 24% chose the development of Class III devices as a priority over Class II or Class I devices. They indicated R&D and portfolio strategies could help mitigate competitive pressures in 2025. Specifically, C-suite executives identified pricing and access to medical devices as the most significant issues facing them. Nearly half of those surveyed (47%) expect pricing and access to significantly affect their strategies in 2025, while another 49% expect a moderate impact.

As Deloitte explains, innovation is how medtech responds to these market dynamics. However, innovation takes time and critical thinking and may create rivalry when companies pursue similar strategic targets, such as in the case of M&A. Many medtech companies are pursuing profitable and high-growth disease states, such as cardiovascular and ophthalmic, to close pipeline and revenue gaps. Reinvestigating the startup pipeline for the acquisition of new technology is an alternative many large medtech companies are exploring.

The aging population, always a growth factor in medtech, continues to increase (Table 2). In the coming decades, life expectancies will increase as the birth rate declines. In 2024, there were approximately 62 million adults ages 65 and older living in the U.S.—an 18% segment of the population. By 2054, approximately 84 million adults ages 65 and older will grow that segment to an estimated 23% of the population.² Even as the 65-and-older population continues to grow over the next 30 years, those in their 100s are projected to quadruple, increasing from just 0.03% of the overall U.S. population in 2024 to 0.1% in 2054.²

The year 2030, demographically, is a turning point for the United States. Beginning in 2030, all baby boomers will have passed the 65-year-old mark. This will expand the size of the older population such that one in every five Americans is projected to be of retirement age.⁹

The Medi-Vantage Perspective

Whether it is one in five (20%) or 23% as predicted by the U.S. Census, a 20% segment is not to be overlooked. There are many more changes like this pending, so be aware. Ensure you and your device development or business strategy team understand how all market segments are changing. We expect an active medtech M&A landscape for 2025 and beyond, driven by technological innovation, regulatory change, and strategic growth initiatives in healthcare. Plan a longitudinal study that tracks trends and developments over time, providing beneficial insight into the long-term effects of key variables in the medtech market. A longitudinal study involves the ongoing observation of healthcare provider behavior, preferences, expectations, and trends in the marketplace to understand how they change over an extended timeframe. By collecting data at multiple points, medtech companies can discover patterns, identify underlying relationships, and make knowledgeable predictions about future market dynamics. Longitudinal studies are effective for identifying the dynamic nature of markets and healthcare provider behaviors, enabling your company to adapt strategies based on the collection of data-driven trends.

References

¹ tinyurl.com/mpo250301
² tinyurl.com/mpo250302
³ tinyurl.com/mpo250303
⁴ tinyurl.com/mpo250304
⁵ tinyurl.com/mpo250305
⁶ tinyurl.com/mpo250306
⁷ tinyurl.com/mpo250307
⁸ tinyurl.com/mpo250308
⁹ tinyurl.com/mpo250309

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Maria Shepherd has more than 20 years of experience in marketing in small startups and top-tier companies. She founded Medi-Vantage, which provides marketing and business strategy for the medtech industry. She can be reached at mshepherd@medi-vantage.com. Visit her website at www.medi-vantage.com.