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The healthy business model

The healthy business model

Medical-technology companies rely on M&A strategy for growth.

Among medical-technology companies there are some brands not really well known, but they are listed on the 10 biggest list (in terms of million US dollars): Fresenius Medical Care (Germany), Becton Dickinson (US), Cardinal Health (US), Stryker Corp. (US) and Baxter International Inc. (US).

Last year, Baxter generated some 10.2 billion US dollars of revenue and was ranked tenth worldwide. The No. 1 listed company was Medtronic Inc. (US) that gained 29 billion US dollars.

McKinsey & Company, an analyst company, diagnosed that for many medical-technology companies, M&A continues to be a core growth driver and will likely see increased activity as these players work to meet overall high-growth expectations for the sector.

McKinsey revealed that looking at the 30 largest medical-technology companies by revenue, more than 60% of their 2011 to 2016 growth was due to M&A (net of divestitures).

These top companies use M&A as a way to stay on top: activity by these participants represented some 70% of the total deals in medical-technology M&A over that period.

An analysis of 54 pure-play medical-technology companies that were publicly listed during a ten-year period (2006 to 2016) to evaluate their approaches to M&A. Only 20% of them relied on a mostly “organic” approach and used almost no M&A.

Those companies that were active for the entire period and that took an organic approach were smaller—only 2 companies that grew organically reached $2 billion or more in annual revenue by 2016.

The McKinsey paper reports that the more mature and larger the company, the more intensive the M&A program.