Medical-technology giants like Medtronic (MDT), Stryker (SYK) and Boston Scientific (BSX) are in the mood for mergers — simply because they’re getting easier.
Over the past 10 months, the three have announced deals worth a total of nearly $5 billion amid a “hot” streak in heart valves, robotic surgery and diabetic instruments.
Innovation helps. But so does cash. Just before Christmas Day 2017, President Donald Trump signed into law a sweeping overhaul of the U.S. tax code, slashing the corporate tax rate to 21% from 35%. The changes also made it temporarily easier for companies to repatriate cash from overseas. After medtech companies kicked a few tires, they decided to use their cash to add growth, Needham analyst Mike Matson said.
“Strong companies with good growth and good gross margins are likely to get acquired,” Matson said.
The biggest acquisitions include Medtronic’s $1.35 billion upfront bid on Mazor Robotics(MZOR) and Stryker’s plans to buy K2M Group Holdings (KTWO) for $1.4 billion. In total, the three biggest medtech firms announced 14 bids north of $4.7 billion.
PNC Capital Advisors analyst Luyi Guo says there have been more tuck-in deals this year. Boston has been the most acquisitive, with Stryker’s activity in line, she said.
“Some companies, such as Boston, have been very active this year, but not all have been as active, so we would expect M&A activities to continue to be robust because of the need to enter growth areas and access innovative and disruptive technologies,” Guo told IBD via email.
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