The Future of MedTech: Building Value for Strategic Acquisitions

Nelson Advisors
21 minutes ago
15 min read

Executive Summary: The Strategic Convergence of MedTech, Technology and Data

The MedTech mergers and acquisitions (M&A) landscape is undergoing a profound and irreversible transformation. The traditional playbook, which long emphasised incremental product improvements and narrowly focused acquisitions, has become largely obsolete. A new era has emerged, defined by the strategic convergence of medical technology, data intelligence, and consumer-centric care models.

This report provides a strategic framework for understanding and building value in this rapidly evolving environment, shifting the focus beyond a company's balance sheet to its intangible assets, innovative business models, and operational excellence.

Current market dynamics reflect a "flight to quality," with a clear trend toward fewer but larger, high-value deals. The primary drivers of this deal flow are no longer just new devices, but increasingly AI-powered solutions, digital health platforms, and assets that facilitate personalised medicine and direct-to-consumer (D2C) engagement. Value is now intrinsically linked to intellectual property that creates a "competitive moat", business models that generate predictable, recurring revenue from services and data, and operational efficiencies enabled by AI and automation.

Navigating this new paradigm requires a heightened level of due diligence. It is no longer sufficient to merely audit financials and legal documents; a thorough assessment of a target's regulatory risk profile, particularly in light of stringent new frameworks like the European Medical Device Regulation (MDR) and In Vitro Diagnostic Regulation (IVDR), is a critical imperative. Similarly, a comprehensive evaluation of the true value and defensibility of a target's IP portfolio is essential. To mitigate risk and bridge valuation gaps in an uncertain economic climate, acquirers are increasingly adopting alternative deal structures, such as earn-outs and licensing agreements.

Looking ahead, the competitive landscape is being fundamentally reshaped by cross-sector convergence, with major technology and retail firms building holistic healthcare ecosystems. This is creating a bifurcated market where MedTech companies must either make large, transformative bets or pursue a disciplined "string-of-pearls" strategy with smaller, highly focused acquisitions.

The New MedTech M&A Landscape: Trends and Transformations

Current Market Dynamics: A Flight to Quality

The MedTech market is on a trajectory of significant expansion, with a global valuation of $542.21 billion USD in 2024 and a projected growth to $886.68 billion USD by 2032, representing a compound annual growth rate (CAGR) of 6.5%. This growth, however, is not uniformly distributed. While the industry is expanding overall, M&A deal volume experienced a decline in 2024, yet total deal value either increased or held steady, signaling a clear strategic pivot toward fewer, larger, and more impactful transactions. This trend is highlighted by the dramatic increase in median upfront deal payments, which surged from $14 million in Q4 2024 to $250 million in Q1 2025. This phenomenon is a direct consequence of ongoing macroeconomic pressures, including market volatility and rising interest rates, which make the financing of large, speculative deals more challenging.

The market environment has created a scarcity of high-quality assets. The difficult capital environment and heightened risk aversion among investors have led to intense competition for a limited number of "high-growth, at-scale, profitable targets" that have successfully de-risked their business models. A causal relationship exists between this macroeconomic uncertainty and the scarcity of attractive targets. High interest rates and volatile markets make it more difficult for early-stage companies to secure the funding needed to mature, gain regulatory approvals, and demonstrate commercial traction.

Consequently, many potential sellers with unproven technologies or incomplete regulatory filings are discouraged from entering the market. The limited pool of de-risked companies, such as those with strong clinical data and FDA clearances, commands a premium valuation from strategic acquirers, leading to larger deal values despite the overall decrease in deal volume. This dynamic creates a "scarcity premium" for truly innovative, mature assets, while a much larger population of early-stage or non-strategic companies struggles to secure an exit.

The Strategic Imperative: Beyond Incrementalism

For decades, MedTech companies have traditionally relied on incremental product improvements, what some refer to as the "traditional playbook" to drive growth and sustain revenue. This approach is no longer sufficient to compete in a landscape where the healthcare ecosystem is undergoing fundamental change. The future is defined by the need to deliver holistic, high-value solutions that move beyond single product features to improve patient outcomes and enhance care efficiency across the entire value chain. This necessitates a fundamental strategic shift from a product-centric model to a customer-centric mindset, a concept first pioneered in the technology industry by software-as-a-service (SaaS) vendors.

M&A has emerged as a primary tool for business transformation, not merely for product acquisition. The evidence suggests that companies are using acquisitions to acquire capabilities or entirely new business models that can fundamentally reshape their operations. Value is shifting from tangible products to "product-enabled services" and "ecosystems" that bring together disparate partners to solve complex problems. To acquire these new models, a traditional MedTech firm cannot simply buy a technology; it must acquire the associated operational infrastructure, talent, and strategic approach. For example, Medtronic's acquisition of Cardiocom, a telehealth and remote monitoring firm, was a strategic move to expand its influence beyond its core medical devices and gain a larger stake in the patient's health journey.

Similarly, J&J's acquisition of Shockwave Medical was not just about adding a new device, but about gaining a technology that enables an integrated procedural platform, leveraging data and clinical analytics to enhance its broader portfolio. These deals are not isolated product additions; they are a strategic reorientation of the entire company, making M&A a crucial lever for transformative change in an "accelerated, volatile and interconnected" market.

The New Currency of Value: AI, Digital Health, and Personalised Care

A. The Centrality of AI and Digital Intelligence

Artificial intelligence (AI) has transcended a mere supporting role to become a core driver of value in the MedTech industry. The market for AI in life science analytics is projected to grow substantially, reaching $6.28 billion by 2034, with the MedTech industry as a whole expected to invest over $10 Billion annually into AI by 2025. Acquirers are demonstrating a willingness to pay premium valuations for AI enabled solutions that promise to enhance diagnostics, streamline clinical workflows, and enable more personalised treatment plans.A significant portion of this growth is concentrated in radiology, which currently accounts for approximately 76% of all marketed AI models approved by the FDA.

The value proposition of AI is expanding beyond the device itself to the data it generates. A device's value is no longer solely in its physical function but also in its ability to collect, analyse, and monetise data. For instance, Stryker's acquisition of Inari Medical was significantly driven by the fact that Inari’s proprietary thrombectomy devices produce "real-time procedural and outcomes data".

This represents a fundamental shift in valuation. The data collected by a device is a new, monetisable asset class that can be used to inform future product design, create new subscription-based service offerings, and provide valuable insights to clinicians. Accordingly, a comprehensive due diligence process must now evaluate a target company’s data collection, management, and analytics capabilities as a separate and critical asset, in addition to the physical device and its intellectual property.

B. The Proliferation of Connected Devices and Digital Health Models

The demand for wearable medical devices is escalating as consumers increasingly become active participants in their own healthcare. Devices such as continuous glucose monitors (CGMs) and other advanced biosensors enable continuous remote patient monitoring (RPM), which can reduce the need for frequent in-person visits and enable timely clinical intervention. This trend is directly unlocking new business models, particularly direct-to-consumer (D2C) channels that allow MedTech companies to bypass traditional B2B sales to hospitals and doctors and engage directly with the end-user.

The ability to connect directly with consumers creates a significant competitive advantage. When a company acquires a target with a D2C channel, it is not just buying a product; it is acquiring a customer relationship and a new, scalable channel. This provides a direct line to consumer insights, allowing for more rapid iteration and deployment of new, software-based services. This strategic advantage is also attracting non-traditional buyers, such as large technology and retail firms like Amazon and Google, which possess an extensive D2C infrastructure and are actively seeking to expand their healthcare ecosystems.

C. The Push Toward Personalised and Precision Medicine

M&A plays a pivotal role in accelerating the development and delivery of personalised and precision medicine.This approach involves tailoring therapies to individual needs, often based on advanced diagnostics and patient specific data. Strategic acquisitions in this space, such as Illumina's purchase of Grail for early cancer detection and Eden Health's acquisition of a compounding pharmacy, demonstrate a clear focus on building a "closed-loop care model" that controls the entire patient journey.

This push toward personalised care is fuelled by a desire to provide more proactive, precise and patient-centred outcomes. The traditional model of one-size-fits-all treatments is being replaced by therapies tailored more closely to individual needs, which is a key growth area for the industry.

The New MedTech Value Drivers

Value Driver	Traditional Approach	Modern Approach
Business Model	Single product sale to hospitals/providers	Product-enabled services; D2C engagement; subscription revenue
Technology	Physical device features and specifications	AI-powered diagnostics; connected health platforms; data intelligence
Product Focus	Broad market appeal; incremental improvements	High-growth, niche specialties; personalised/ precision medicine
Acquisition Rationale	Gaining market share; expanding product portfolio	Acquiring new capabilities; accessing a direct patient channel
Competitive Edge	Product features and sales force reach	Intellectual property moat; data assets; regulatory excellence

Beyond the Balance Sheet: The Intangible Drivers of Acquisition Value

A. Intellectual Property as a Competitive Moat

For many MedTech companies, a substantial portion of their overall business value is represented by intangible assets, particularly their intellectual property (IP) portfolio. IP due diligence has evolved from a simple box-checking exercise into a critical strategic tool for evaluating a target's market position and potential risks. Investors and acquirers often view a company's IP portfolio as a proxy for its business value and maturity. A robust and balanced portfolio, which includes patents, trademarks, and trade secrets, signals a well-defended business.

The value of IP extends beyond its potential to generate revenue; it also serves a critical risk-mitigation function for the acquirer. A granted patent, especially a mature one that has survived multiple examination cycles, provides "patent office validation" of the core innovation, indicating that it is defensible against competitors and difficult to replicate. This directly de-risks the company's future revenue streams and justifies a higher valuation.

A failure to conduct proper IP due diligence can lead to catastrophic errors, such as overpaying for non-exclusive, non-defensible, or legally encumbered IP. Thus, the maturity and quality of a company’s IP portfolio directly correlate with its attractiveness and valuation. The due diligence process must therefore address three fundamental questions: Is the IP valuable in the real world (does it create market exclusivity)? Does the company genuinely own the IP? And what risks are associated with it, such as ongoing litigation, licensing restrictions, or freedom-to-operate issues?

B. The Platform-First Approach to Acquisitions

A growing trend in the MedTech M&A landscape is the pursuit of platforms, not just products. This strategy is driven by the goal of rapidly integrating new capabilities and creating an interconnected ecosystem that can address complex healthcare challenges. The acquisition is no longer a "bolt-on" addition to a portfolio but a strategic move to integrate a target into the core operational and technological infrastructure of the acquiring company.

The acquisitions of Shockwave Medical by Johnson & Johnson and Inari Medical by Stryker are prime examples of this platform-first approach. J&J's acquisition of Shockwave was a strategic move to establish a new "priority platform" with the potential for over $1 Billion in annual sales, complementing its existing portfolio of category-leading cardiovascular technologies. Similarly, Stryker's deal for Inari was driven by the opportunity to acquire a niche technology that provides real-time data, which is highly complementary to Stryker's strategy of integrating AI and clinical analytics into its surgical platforms.

This strategic pivot means that a target company is now valued for its ability to enable post-deal synergies, such as streamlined data analytics or supply chain control, which directly enhance the acquirer's core business. This requires a more rigorous due diligence process that assesses a target's operational and technological interoperability to ensure a seamless integration.

Navigating the Minefield: Critical Due Diligence for Modern Deals

A. Regulatory Due Diligence: A Strategic Necessity

The MedTech sector is grappling with an unprecedented regulatory overhaul, most notably with Europe's transition to the more stringent Medical Device Regulation (MDR) and In Vitro Diagnostic Regulation (IVDR).These changes are fundamentally redefining how MedTech businesses are valued in M&A transactions. For an acquiring company, a robust regulatory due diligence process is no longer optional; it is a critical step for understanding a target’s compliance risk profile and assessing the potential costs of remediation. Failure to do so can lead to expensive post-acquisition surprises, including significant costs for clinical investigations or production process changes.

Regulatory compliance, once considered a liability or a mere cost center, is now a strategic asset. A company that has successfully navigated the complex MDR transition and secured early certification gains a temporary competitive advantage, commanding a premium valuation. This is because it has not only de-risked its portfolio but also established a defensible market position against less compliant competitors. Furthermore, organisations that have successfully managed these transitions possess human capital with scarce expertise, making their regulatory talent a significant component of acquisition value. This changes the due diligence process from a simple risk check to a comprehensive value assessment.

B. The New Due Diligence Playbook

In this new environment, traditional due diligence is insufficient. A modern due diligence playbook must include a thorough IP valuation, an assessment of a target's technology, and a review of its business model. This involves scrutinising intellectual property to ensure it is defensible and creates a competitive advantage, rather than simply confirming its existence. Furthermore, with the proliferation of AI and digital health solutions, due diligence must also evaluate potential risks related to data integrity, AI bias, and data privacy protocols. The introduction of new regulations, such as the EU AI Act, means dealmakers must be forward-looking in their risk assessments and plan for future compliance needs.

C. Alternative Deal Structures as a Risk Mitigation Strategy

To bridge valuation gaps and manage risk in an economically volatile market, dealmakers are increasingly adopting alternative structures. These include earn-outs, royalties, and co-development partnerships, which tie a portion of the payment to the achievement of specific, measurable milestones, such as successful clinical trial completion or regulatory approval. These structures are particularly well-suited for high-risk, innovation-heavy sectors like biotech and digital health, where the timelines for regulatory approval and commercial success are often uncertain. This flexibility offers a way for both buyers and sellers to mitigate risk and move deals forward even when market conditions are challenging.

Critical Due Diligence Checklist for MedTech Acquisitions

Due Diligence Area	Key Questions	Rationale/Value
Intellectual Property	Does the patent portfolio create market exclusivity?	Establishes a defensible competitive moat and protects future revenue streams.
Regulatory Compliance	Is the company's product portfolio MDR/IVDR certified?	Identifies compliance gaps and associated costs; signals a strategic advantage and reduced post-acquisition risk.
Technology/AI	Is the AI model trained on a diverse dataset to mitigate bias?	Addresses ethical concerns and reduces the risk of skewed outcomes, especially in regulated clinical workflows.
Business Model	Does the business model generate recurring revenue or provide access to a D2C channel?	Evaluates long-term value beyond a single product sale and positions the company for future growth and scaling.
Data & Privacy	Are data integrity and privacy protocols robust and HIPAA/GDPR compliant?	Mitigates legal and reputational risk associated with patient data, which is a key asset class for AI-driven solutions.

Case Studies in Strategic Success

A. Johnson & Johnson's Acquisition of Shockwave Medical

In April 2024, Johnson & Johnson announced its acquisition of Shockwave Medical for $13.1 Billion, a significant strategic move within the high-growth cardiovascular intervention market. The rationale behind this deal was to expand J&J's leadership in cardiovascular care by acquiring a highly innovative, minimally invasive technology that addresses a critical unmet patient need. The acquisition of Shockwave, which uses intravascular lithotripsy to treat calcified arterial lesions, was part of a larger, long-term strategy to build a portfolio of "category-leading" segments, following its previous acquisitions of Abiomed and Laminar. The deal created a new "priority platform" with the potential for over $1 Billion in annual sales, underscoring its strategic importance. This deal demonstrates a focus on strategic bets for future growth, even though it was expected to be dilutive to earnings in the short term.

B. Stryker's Acquisition of Inari Medical

In the first quarter of 2025, Stryker acquired Inari Medical for $4.9 Billion, a transaction that provided Stryker with an entry into the rapidly growing peripheral vascular segment. The deal exemplifies a focused, "singular strategic deal" on a niche, high-growth specialty. The primary value proposition of the acquisition was not solely the physical thrombectomy devices, but rather the fact that Inari's technology generates "real-time procedural and outcomes data". This capability perfectly aligned with Stryker's broader strategy to integrate AI, clinical analytics, and procedural intelligence into its surgical platforms. This case study highlights the strategic shift from a "device-only" acquisition to a "device-plus-data" acquisition, where the data component is as, if not more, valuable than the physical hardware.

The M&A playbooks of J&J and Stryker, while both involving large acquisitions, reveal subtle but important differences in strategy. J&J's series of acquisitions in the cardiovascular space, including Shockwave, Abiomed, and Laminar, demonstrate a "portfolio consolidation" strategy. The company is making a series of large, high-value bets to establish and solidify its position as a category leader across multiple high-growth segments. In contrast, Stryker’s acquisition of Inari, while also large, is more a focused entry into a high-growth niche that adds a critical technological capability, data and AI to its existing platform. This indicates that there is no single M&A playbook for large firms; strategies are tailored to the firm's existing strengths, portfolio gaps, and long-term vision.

The Future of Value Creation: Recommendations for Stakeholders

A. For Acquirers: Building a Resilient M&A Strategy

To thrive in the evolving MedTech landscape, acquirers must adopt a new, resilient M&A strategy. The focus should shift from products to capabilities, seeking targets that provide new business models, data platforms, or operational efficiencies, not just new devices. Acquiring a company with a strong D2C channel or a subscription-based service model can unlock new revenue streams and provide a direct link to the end-user.

Acquirers must also be prepared to look beyond traditional MedTech firms, as cross-sector convergence with technology and retail giants is reshaping the competitive landscape.Investing in specialised due diligence is paramount; a simple financial audit is insufficient. Rigorous regulatory, IP and AI ethics due diligence are essential to uncover hidden risks and assess a target's true, long-term value. Lastly, leveraging alternative deal structures like earn-outs and licensing agreements can serve as a crucial tool for managing risk and bridging valuation gaps in a volatile market.

B. For Targets: Positioning for a Premium Acquisition

For MedTech companies seeking a premium acquisition, the focus should be on building a valuable business, not just a sales pitch. The most attractive companies are "bought, not sold". This requires a proactive strategy of de-risking the business through strong clinical data, early regulatory approvals, and demonstrated commercial traction. Cultivating a defensible competitive moat is also critical; investing in a robust and comprehensive IP portfolio that creates market exclusivity and is defensible against competitors can significantly increase a company’s valuation.

Prospective sellers must also think like an acquirer by understanding how their product or technology fits into a strategic buyer's long-term vision. The goal is to enhance the acquirer's core business, not to cannibalise it. Finally, mastering the regulatory landscape is a strategic imperative. Early MDR or FDA certification can be a significant competitive advantage that commands a premium valuation.

Recommendations for MedTech M&A

Stakeholder	Key Recommendation	Strategic Rationale
Acquirers	Focus on Capabilities	Acquiring a business model or data platform is more transformative than adding a single product.
	Embrace Cross-Sector Deals	The future of healthcare is a convergence of MedTech, technology, and consumer services.
	Invest in Due Diligence	Go beyond financials to assess regulatory, IP, and AI risks for a more accurate valuation.
	Utilize Alternative Structures	Mitigate risk and bridge valuation gaps with flexible deal terms like earn-outs.
Targets	De-Risk the Company	A progressively de-risked startup with strong data and approvals is more attractive and commands a premium.
	Understand the Acquirer	Position the company as a strategic complement to an acquirer's core business.
	Build a Defensible IP Moat	A robust IP portfolio creates market exclusivity and protects long-term value.
	View Regulatory as an Asset	Early compliance and a resilient regulatory framework are now key value drivers.

Conclusion: The Evolving Playbook for MedTech Value

The future of MedTech M&A is not just about a change in products but a fundamental redefinition of what constitutes value. This value is increasingly intangible, found in data, software, business models, and operational excellence.

The old playbook, which focused on a product-centric, incremental approach, is no longer viable. To succeed, stakeholders across the MedTech ecosystem must adopt a new strategic mindset that merges the industry's traditional strengths in engineering and clinical efficacy with the agility and innovation of the technology sector.

The companies that can effectively navigate this convergence, embracing AI, data-driven insights and holistic care models, will not only survive but will lead the industry's next wave of growth and value creation.

Nelson Advisors > MedTech and Healthcare Technology M&A

Nelson Advisors specialise in mergers and acquisitions, partnerships and investments for MedTech, Digital Health, HealthTech, Health IT, Consumer HealthTech, Healthcare Cybersecurity, Healthcare AI companies based in the UK, Europe and North America. www.nelsonadvisors.co.uk

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