Increasing device complexity has outpaced the capabilities of most Original Equipment Manufacturers (OEMs). Advanced manufacturing platforms are now strategic assets, not just vendors, driving a shift in M&A focus from traditional devices to the organizations that can build them.
A confluence of factors is driving M&A toward Contract Development and Manufacturing Organizations (CDMOs). Capital is loosening as interest rates fall, a decade of private equity investments are maturing, pharma-device convergence (e.g., GLP-1s) is increasing, and geopolitical pressures encourage onshoring.
Years ago, MedTech M&A was driven by acquiring revenue and customer lists. Today, the priority has shifted to acquiring scarce, specialized technical capabilities and regulatory infrastructure that are difficult and time-consuming to build internally, signaling a major evolution in valuation drivers.
Regulatory readiness is one of the most underappreciated value drivers in MedTech M&A. An acquirer will pay a premium for a target with a mature regulatory infrastructure, as this "organizational muscle" can save them 2-3 years versus building it from scratch.
A simple heuristic for the build-vs-partner decision: Does your manufacturing process create unique intellectual property? If so, own it. If it merely consumes capital, partner with a CDMO. This preserves precious resources for R&D, clinical evidence, and commercialization.
The current MedTech M&A market is a virtuous cycle feeding itself. Private Equity exits of mature CDMO platforms provide acquisition targets for OEMs. Simultaneously, OEM carve-outs of non-core manufacturing assets create new platform investment opportunities for PE firms.
The market is punishing indecision and "paralysis by analysis." The most effective strategy is simply to make a decision—what to own, what to access via partners—and then commit to execution. Leaders must build the future they want rather than wait for it.