Life Sciences Horizons Brochure 2025 - Flipbook - Page 53
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2025 Horizons Life Sciences and Health Care
Amid regulatory uncertainty, medical device mergers & acquisitions show promise in 2025
The U.S. is experiencing political, regulatory, and
economic changes that impact medical device M&A.
While some companies may hesitate in uncertain
times, others see opportunities for short- and longterm value growth through portfolio expansion and
adoption of cutting-edge technologies, provided
risks are well managed. A proactive M&A strategy is
crucial, as regulatory hurdles, financial missteps, and
operational disruptions can derail deals. Successful
acquirers are focusing on strategies to maximize value
and mitigate unexpected liabilities.
Specialized regulatory due diligence
Regulatory complexities make due diligence in medical device
M&A critical. For example, unlike in other industries, acquiring
a company does not automatically mean acquiring full market
access for all indications for all acquired products as FDA
approvals, Premarket Approvals (PMAs), 510(k) clearances, and
EU MDR/IVDR certifications may need to be reevaluated for
alignment of the indications with the priorities of the transaction.
This dynamic has the potential to delay commercialization,
negatively impact deal value, and in some cases, saddle acquirers
with unanticipated or uncovered risks and regulatory liability.
Further, incorporating technologies used in already approved
devices does not necessarily mean that regulatory clearance of
subsequent products will be straightforward. Worse still, a target
company with a history of regulatory violations — such as FDA
warning letters, product recalls, or quality system deficiencies
— could foist significant post-close risks on the acquiring
company if not dealt with at the time of the transaction.
Accordingly, sophisticated acquirers have had a renewed focus on
highly specialized regulatory diligence, which builds confidence
throughout the M&A process, mitigates and properly allocates
risk, verifies and preserves value, and prepares firms for day-one
integration and operational readiness. It also allows those
acquirers to discover new information about a target that refine
and support different valuations than their competitors who have
not engaged in the same level of diligence.
Integration efforts
Beyond regulatory concerns, post-merger integration is rarely
seamless, and if not managed properly can lead to inefficiencies,
talent loss, and operational setbacks. One of the biggest risks is
losing key personnel who are essential to innovation and
compliance. Supply chain vulnerabilities also loom large as many
medical device companies rely on third-party manufacturers and
component suppliers, and failure of these vendors to meet FDA
or international quality standards could result in severe business
disruptions and dislocations. Additionally, cybersecurity threats
are increasing, especially with the rise of connected medical
devices and digital health platforms, making IT integration a
critical part of post-merger planning.
A robust, and well-documented diligence process greatly
reduces post-merger integration risks and associated costs that
can erode overall deal value. In particular, medical device firms
are increasingly focused on utilizing formal and informal deal
processes in the earlier deal stages, including engaging with key
personnel and stakeholders to better understand how to best
incentivize and maximize growth.
Getting valuations right
Medical device firms remain fixated on reducing financial
risks as the industry continues to have many unknowns:
rapid technological advancements can quickly render a newly
acquired product obsolete; hidden legal liabilities may lead to
costly litigation; and shifting regulatory landscapes may lead to
reimbursement challenges. External market pressures can also
impact valuations. For example, regulatory environments in
and the relationships between the U.S., EU, and China are
fluid, creating new obstacles for companies looking to scale
internationally. At the same time, economic uncertainty, trade
policies, interest rate fluctuations, and increased competition
mean that a deal that is favorable today could become financially
burdensome tomorrow.
To respond, firms are continuing to deepen their valuation models
to adjust for factors that can hamper long-term revenue potential.
Acquirers are also continuing to use contingent consideration as a
means of de-risking future regulatory and operational uncertainties.
In short, 2025 promises to be a defining year for medical device
M&A with vast opportunities for companies that boldly employ
strategies throughout the deal process that uncover and creatively
mitigate liabilities to effectively structure acquisitions in an
increasingly competitive and uncertain market.
Adrienne Ellman
Partner
New York, Boston
Jodi Scott
Partner
Denver
Shaida Mirmazaheri
Senior Associate
Boston
Gregory Adam Kass
Associate
Denver
