Venture capital bright spot - GlobalData

M&A activity in the medical equipment sector took a dip in Q3 2011 although the venture capital market remained relatively buoyant, as the latest market research from GlobalData reveals.


After a strong second-quarter performance, both the number and the value of M&As and asset transactions in the medical equipment sector dipped in Q3 2011.

The latest market analysis comes from GlobalData's 'Medical Equipment Quarterly Deals Analysis M&A and Investment Trends - Q3 2011' report, which provides detailed information on M&As, equity/debt offerings, private equity, venture financing and partnership transactions.

"On a year-on-year basis, the number of deals showed a marginal increase from 121 in Q3 2010 but values were down, from $26.2 billion in Q3 2010."

M&As and asset transactions, which include change in ownership and control of companies or assets, reported a decrease in the number of deals and deal values in Q3 2011. The industry recorded 122 deals worth $6.3 billion in Q3 2011, as compared to 156 deals worth $48.9 billion in Q2 2011, a decline of 22% in the number of the deals and 87% in value terms. On a year-on-year basis, the number of deals showed a marginal increase from 121 in Q3 2010 but values were down, from $26.2 billion in Q3 2010.

Deal highlights

Among the notable deals of Q3 2011 was the General Dynamics $960 million acquisition of Vangent Holding to expand its exposure in the growing healthcare IT market. PerkinElmer signed a $600 million agreement to acquire Caliper Life Sciences to enhance its global position in molecular imaging and detection for human and environmental health.

The in-vitro diagnostics market made a comeback to the top position in deal-making activity in Q3 2011, as many companies in the medical equipment industry looked to this area to help them develop robust product pipelines and fill gaps in product lines. This part of the market recorded 143 deals worth $6 billion in Q3 2011.

Capital raising through the issuance of equity and debt securities

Global equity offerings, including initial public offerings (IPO), secondary offerings, and private investment in public equities (PIPEs), reported a decline in deal activity in Q3 2011. The segment reported 64 deals worth $1.7 billion in Q3 2011, compared to 84 deals worth $2.7 billion in Q2 2011.Out of 64 deals reported in Q3 2011, there were 38 PIPE deals worth $294.4 million, 24 secondary/ follow-on offering deals worth $1.1 billion and seven IPOs worth $402.2 million.

Debt offerings, including secondary offerings and private debt placements, decrease by 37% in the number of deals with 22 deals in Q3 2011, as compared to 35 deals in Q2 2011. Deal values decreased to $6.6 billion in Q3 2011 from $12.5 billion in Q2 2011.

Investment in the venture capital market

The venture capital (VC) market reported 182 deals worth $1.6 billion in Q3 2011, as compared to 209 deals worth $2.1 billion in Q2 2011. On a year-on-year basis, deal values remained unchanged with $1.6 billion in Q3 2010 and Q3 2011.

However, the number of deals was greater in Q3 2010 with 200 compared to 182 deals in Q3 2011. Out of the 182 deals reported in Q3 2011, 82 were growth stage financing deals worth $901.4 million, 72 were start-up stage financing deals worth $443.2 million, 18 were later stage financing deals worth $250.6 million and 10 were seed stage deals worth $5.3 million.

With companies in the medical equipment industry focusing on the expansion of their product portfolio and improving their asset valuations, the growth capital/expansion stage financing dominated the VC market with 45% of total deals in Q3 2011. In second place was start-up stage financing with 40% of total deals.

Domain Associates, LLC topped the list of venture financing firms by participating in 10 deals with a total value of $167.6 million in the period Q4 2010 to Q3 2011. The private equity (PE) market recorded a significant increase in deal values in Q3 2011. With medical equipment industry offering strong growth prospects and being highly regulated, it was able to attract investor's attention. The market reported deals worth $12.7 billion in Q3 2011, as compared to $2.4 billion in Q2 2011. The number of deals decreased to 13 in Q3 2011 from 19 in Q2 2011.

"With medical equipment industry offering strong growth prospects and being highly regulated, it was able to attract investor's attention"

Out of the 13 deals reported in Q3 2011, three were secondary buy-out deals worth $1.1 billion, three were institutional buy-out deals worth $320 million, three were direct investment deals, two were leveraged buy-out deals worth $9.3 billion, one was a private transaction worth $1.9 billion and one was a management buy-out deal worth $23.1 million.

Region by region

Deal values in North America remained the same, reporting $24 billion in Q2 2011 and in Q3 2011. With growing regulatory obstacles from the FDA in the US, the region was unable to lure a great deal of extra investment. The region recorded 421 deals in Q3 2011, as compared to 549 deals in Q2 2011. Europe registered a huge decrease in deal values, down to $4.2 billion in Q3 2011 compared to $42.8 billion in Q2 2011. The number of deals decreased to 143 in the same period.

Asia Pacific reported a decline in the number of deals and deal values in Q3 2011. The region recorded 73 deals worth $566.8 million in Q3 2011, compared to 83 deals worth $1.3 billion in Q2 2011.


Medical Device Developments
This article was first published in our sister publication Medical Device Developments.