MEDICAL TECHNOLOGY M&A MARKET DYNAMICS
Interest rate cuts bring a breath of fresh air to the Medical Technology sector, as more capital becomes available for acquisitions. This positivity was already evident in the market, with Q3 recording significant transaction volume. Even so, buyers remain diligent as all eyes turned to the election and market reaction following the results. As these trends continue, buyers are continuing to sit on the sidelines for struggling assets, but ‘A’ tier companies are driving highly competitive processes with significant interest and strong valuations.
- After months of anticipation, the Federal Reserve finally announced a significant drop in the federal funds target, cutting it by a full 50 basis points—more aggressive than many had expected. Investors and acquirers, who had long been calling for this cut, are now poised to be active in capital markets, given the uncertainty about how long rates will remain at this level and the ongoing need for lower financing costs. Additionally, all eyes are on the results of the Presidential election to see how economic policies will shape the next four years. Amid these trends, M&A activity is heating up, positioning 2024 to end on a high note.
- In Q3 2024, Medical Technology M&A had an exceptionally strong quarter with 165 transactions announced, bringing the year-to-date total to 428, slightly surpassing the 424 transactions recorded by Q3 in 2023. The Services segment led with 24% of transactions, followed closely by Equipment, Consumables & Disposables, and Therapeutic Devices, which accounted for 20%, 17%, and 15% of third-quarter M&A activity, respectively.
- The third quarter showed strong results for Medical Device public equity performance compared to a sluggish Q2. The Orthopedic index was the top performer, up 15% for the year, while the Diversified Medical Device index also performed well, up 13%. However, both indices trail the S&P 500 Growth Index which is up 30%. On a less positive note, the Cardiovascular index finished the quarter as the worst performer, up only 5%.
