Bildnachweis: Baker Tilly Munich.
The increase in distressed merger and acquisition activity within the medtech sector can be attributed to a combination of tighter funding, reduced valuations, and heightened investor scrutiny. Companies that find it hard to turn a profit need
to rethink their alternatives, and they frequently consider divesting part of or even their entire business. These challenges are compounded by regulatory pressures and increased costs, often resulting in distressed transactions.
A significant shift has emerged in the medtech industry. Companies that once benefitted from rapid funding and digital enthusiasm now face growing financial pressure. Signs of distress are becoming unmistakable: exhausted liquidity, missed milestones, and the withdrawal of investor support. Strategic options narrow quickly, and difficult decisions become urgent. As interest rates rise, investor preferences turn towards business models with sustainable profitability, life for weaker market participants becomes unstable. These factors create clear indicators of distress, such as increasing financial obligations and a mounting urgency to seek external guidance.
Dealing with distress: When survival shapes strategy
When serious risk of distress becomes undeniable, companies and their stakeholders must abandon strategies focused solely on growth or expansion. Survival becomes the key motivator, reshaping decision-making across all organisational levels. In this context, M&A transactions have shifted from being tools for expansion to serving as crucial means for safeguarding core assets, retaining specialised expertise, or securing intellectual property. In severe cases, the company is already insolvent or in bankruptcy proceedings, so the transaction serves to manage outstanding financial obligations. This fundamentally shapes the transaction process, as assets might be acquired directly from insolvency administrators, which requires careful attention to regulatory requirements, asset valuation, and the timely transfer of key assets under challenging conditions. Buyers see opportunities to acquire technology or access niche markets, often at favourable terms. Distressed transactions frequently occur under severe time constraints and with limited room for comprehensive negotiations, resulting in a process in which the balance of power often shifts towards the buyer. Robust preparation and a clear focus on the essentials are required to navigate these high-stress situations effectively.
Strategic crossroads: Asset deal or share deal in troubled times?
When a transaction becomes unavoidable, a central question arises: should the parties pursue an asset deal or a share deal? In a share deal, the buyer acquires the rights and responsibilities inherent in the legal entity. In contrast, an asset deal allows the acquirer to select the components, leaving unwanted liabilities behind. In regulated sectors such as medtech, where assets like product approvals, patient data, and intellectual property predominate, this distinction is especially relevant. Taking this into consideration, a share deal might seem preferable due to easier realisation. An asset deal, however, allows – as a decisive advantage in distressed transactions – targeted value acquisition while avoiding legacy risks.
Why asset deals outshine: The smart move in troubled times
Asset deals enable buyers to isolate the attractive components of a business, such as patent portfolios or regulatory approvals, while minimising exposure to outstanding debt or litigation. Asset deals also offer greater flexibility in structuring the transaction and aligning acquired elements with an existing business model. This is particularly vital in the medical technology industry, where regulatory requirements, ongoing research efforts, and data privacy rules play a crucial role. The ability to avoid legacy issues, such as unknown compliance breaches or environmental liabilities, makes asset deals especially attractive for companies navigating insolvency scenarios. Nevertheless, asset deals can present risks of their own, especially if transfer formalities are neglected.
Inside the asset deal: What makes medtech transactions unique?
Asset deals in the medical technology sector demand careful attention to both hard and soft assets, each requiring targeted strategies for risk mitigation and value preservation. On the hard asset side, the transfer of manufacturing equipment, proprietary technologies, and physical infrastructure must be supported by comprehensive documentation and clear title verification to avoid operational delays. Soft factors, such as intellectual property, product certifications, and regulatory approvals, are often even more complex. These assets typically cannot be simply transferred with the deal and may require new licensing, regulatory review, or even rebranding, potentially disrupting market access. Renegotiation of licensing agreements and careful management of ongoing clinical trials are critical, as any gaps can endanger compliance or introduce costly interruptions. Asset deals in medtech frequently require multidisciplinary teams to address these multiple layers to ensure precise legal work, alignment with data protection and cybersecurity standards.
Rulebooks and risks: Navigating medtech’s regulatory maze?
The regulatory framework for medtech companies is constantly evolving. Mergers and acquisitions in this sphere are subject to robust oversight relating to patient safety, cybersecurity, and data protection. Regulatory authorities may inspect the structure of a proposed deal carefully and require additional clearances, particularly if the transaction involves sensitive personal health information or affects competition in key markets. Missteps in compliance integration or insufficient preparation can cause delays or even termination of the transaction. A precise understanding of applicable laws and early engagement with regulatory bodies are therefore essential for success.
Lessons from the frontlines: key success factors in distressed M&A
Success in distressed mergers and acquisitions in the medical technology sector rests on several pillars. Strategic clarity and a well-defined acquisition rationale help guide negotiations to a successful outcome. Comprehensive and multidisciplinary due diligence, covering regulatory, legal, technological, and human resource aspects, is essential to identifying and lowering risks in advance. Early and transparent communication with stakeholders helps maintain confidence and secures critical knowledge throughout the process. Post-acquisition integration should be carefully planned, with particular attention to retaining talent and continuing innovation projects. Buyers and sellers who engage experts early, prepare robust transition plans, and maintain flexible structures are best positioned to achieve durable success, even in times of crisis.
Eyes on tomorrow: What’s next for medtech M&A?
The future of mergers and acquisitions in the medtech market will be shaped by ongoing regulatory developments, increasingly digital business models, and demographic trends driving healthcare demand. The consolidation of the market, associated with a growing presence of private equity investors, indicates that competitive pressure will continue to rise. Companies that prepare early for potential distress, invest in robust compliance systems, and stay flexible in their transaction strategies will be well-positioned to compete. Agility, resilience, and disciplined risk management will become essential tools for shaping the future of medtech companies’ chance of success.
About the author:
Stephan Zuber is Partner at Baker Tilly Munich and specialist lawyer for commercial and corporate law with extensive expertise in corporate transactions across the healthcare and pharmaceutical sectors.
