Jun 28, 2022

Medical Device Outsourcing Market Update: M&A Market Remains Robust as Private Equity Builds and Enhances Sector Portfolios

Medical Device Outsourcing m&aMedical Device Outsourcing M&A Transaction Volume Continues at Rapid Pace in Early 2022

Capstone Partners released its June 2022 Medical Device Outsourcing Sector Update, reporting that supply chain disruptions, labor constraints, and surgical procedure delays have severely challenged medical device original equipment manufacturers (OEMs) through early 2022—further highlighting the need for innovative, turnkey solutions from outsourced partners. Healthcare delivery organizations continue to combat significant workforce shortages that have impacted the scheduling of elective procedures, a key revenue driver for OEMs.

Underlying dynamics including an aging U.S. population, increasing prevalence of chronic diseases, and medical technological advancements have created a robust backdrop of demand for the Medical Device and Diagnostics segments. In addition, stringent regulatory requirements across the sector create significant incentive for OEMs to outsource device manufacturing and commercialization to organizations with expertise in navigating this environment.

Medical Device Outsourcing merger and acquisition (M&A) transaction volume has continued at a rapid pace in early 2022 with 17 transactions announced or completed—outpacing the year-to-date (YTD) total from 2021. While strategics continue to consolidate, adding capabilities to better serve their client base, private equity buyers are unquestionably driving deal activity. Financial buyers have accounted for 15 out of 17 2022 transactions, with several familiar names adding onto existing platform investments. Private equity firms have capitalized on healthy valuations, which has been evidenced by successful exits of their portfolio companies. Notably, Altaris Capital Partners agreed to sell Paramit, a developer and manufacturer of complex electronic medical devices, for $1 billion equating to ~20x EBITDA (June 2021). Altaris has continued to deploy capital towards the sector, entering an agreement to acquire Intricon (Nasdaq:IIN) in February 2022 for an enterprise value of $221.1 million and 21.8x EBITDA. The strong valuation environment is not only applicable to large companies, as dealmakers have noted double digit EBITDA multiples paid for highly sought-after targets with less than $10 million in EBITDA.

Also included in this report:

  • How surgical procedure volume is expected to fare in the coming quarters
  • M&A valuation analysis and drivers of premium multiples
  • Highlights on private equity transaction activity

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