Medtech M&A, VC funding slowed to snail's pace in the first half of 2023: Evaluate

After experiencing a boom in 2021 to make up for the dearth of dealmaking in 2020, M&A moves and VC fundraising in the medtech industry have been on a steady downward slope.

Last year, mergers and acquisitions in the sector represented just under $65 billion in deals, according to Evaluate Medtech, a number well above 2020’s $28.8 billion total, but still a slip from 2021’s more than $80 billion of M&A moves.

And that slide appears to be growing even steeper this year, as Evaluate’s first-half analysis suggests that medtech deals could reach their lowest tally in a decade if the pace doesn’t pick up soon.

According to the analysis, in the first six months of the year, only about $13 billion traded hands in M&A transactions, spanning just 42 deals. If that trajectory holds true through the second half of the year, it would make 2023’s total the lowest in a decade, since 2013’s $23.3 billion.

It could also result in the smallest number of deals in recent memory, per Evaluate—smaller even than the COVID-stricken months of 2020, which still churned out 126 mergers and acquisitions that represented nearly $30 billion. And while last year only brought in 81 total deals, their combined $65 billion total meant that 2022’s average deal size was easily the highest of the last decade, at $1.2 billion.

In comparison, the deals this year have been on the smaller side, with an average size of around $312 million. Only four of the first half’s M&A moves crossed the billion-dollar threshold; the largest deal to date was Bain Capital’s $3.1 billion bid for Olympus’ scientific solutions business, which was announced last August and completed in April of this year.

But things do appear to be taking a turn. In just the few days since Evaluate’s report was published last week, medtech companies have inked a handful of major deals. Danish devicemaker Coloplast offered up $1.3 billion to buy out the Icelandic Kerecis, which uses intact fish skin to make human wound care products. Thermo Fisher Scientific, meanwhile, bulked up its offerings in the clinical research services sector—previously the target of its $17.4 billion deal for PPD in 2021—by putting down $912.5 million for data intelligence platform maker CorEvitas.

The first half of this year also marked an especially slow period for venture capital investments in the industry. According to Evaluate, only about $2.5 billion in VC funding poured into medtech startups throughout those six months, which adds up to the lowest first-half VC total since 2015.

As with the slipping M&A numbers, if this pace stays steady for the rest of the year, 2023 would mark another year-over-year decline—down from the $7.3 billion worth of VC dollars raised in 2022’s return to normalcy, and a far cry from 2021’s $9.9 billion tally, the largest ever for the industry.

Of the paltry 65 financing announcements throughout 2023’s first half, only four reached nine-figure territory, and just one surpassed $200 million: HeartFlow’s $215 million, Bain-led fundraise in April, which paled in comparison to HeartFlow’s own last VC round.

And amid the tough economic outlook, those private companies are staying that way: As Evaluate noted, there were “precisely zero” IPOs in medtech throughout the first half of the year.