ARTICLE SUMMARY:
The recent wave of mega-mergers has medtech executives increasingly wondering whether scale is becoming more important in generating value and, if so, if this trend is likely to continue. By Ajay Gupta, Jake Henry, Gerti Pellumbi and Siddhartha Chadha, McKinsey & Co.
Last year, 2014, a banner year for M&A in medtech, saw three of the industry’s six largest deals ever:
Medtronic plc’s merger with Covidien, at $43 billion; the deal that created Zimmer Biomet at $13 billion; and Becton Dickinson & Co.’s acquisition of CareFusion, valued at $12 billion. (The others in the top six, listed chronologically, are Boston Scientific Corp./Guidant at $28 billion and the Thermo Scientific/Fisher Scientific combination—now known as Thermo Fisher Scientific Inc.—at $12 billion, both in 2006, and Johnson & Johnson‘s acquisition of Synthes in 2011 for $21 billion.) This consolidation has come against a backdrop of challenges. Industry growth continues to be muted, an ongoing trend since 2009 (see Figure 1). The pace of innovation has slowed, with a decline in premarket approval applications (PMAs), 510(k)s, and venture-capital investments in med-tech. Price pressures have also intensified across many large segments, such as orthopedics, imaging, and cardiovascular. 
