June 1, 2017
By James Woods, US Deals Principal
The medical technology industry has enjoyed a period of exceptional performance over the last five years and has delivered greater shareholder returns than any sector within the S&P 500.
- The median total shareholder return (“TSR”) of the medtech industry group of 19.9% was about one-third higher than the 14.6% for the S&P 500.
- Medtech companies have invested more than $135 billion into over 140 mergers and acquisitions over the last five years while investment in the sector from non-traditional competitors has increased significantly.
- Multiples of earnings before interest, taxes depreciation and amortization have expanded from 10.7x to 15.2x since 2011, reflecting expectations for future growth.
These numbers are excellent. But now for the hard part – how to keep delivering top tier shareholder returns while dealing with a highly competitive market and heightened expectations for future performance.
In our latest paper, The Medtech value challenge: How can Medtech companies drive value creation through the continuing evolution of the industry? we discuss ways companies can focus on value creation in order to realize the potential opportunity in the industry and maintain high shareholder returns, including:
- Acquire carefully: Successful acquirers maintain a sharp focus on value, including quantifying the value of synergies and remaining disciplined when developing bid strategies to avoid overpaying for a target.
- Innovate business models: Companies that are effective in expanding beyond product driven value and are able to gain access to the skills and capabilities necessary to compete will be best-suited to realize market opportunities in the future.
- Manage for value: Identifying the pockets of value creation and consumption within a business can provide powerful insights to direct investments in the areas most likely to generate profitable growth.
We invite you to read the full paper to learn more about how Medtech companies can assess existing strategies through the lens of value creation in order to drive future performance.