The Great Orthopedic M&A Slowdown: What’s Behind the 40% Decline?

M&A activity in the medtech and orthopedic sectors has slowed to a decade-low in 2024, with only six orthopedic acquisitions compared to nearly 30 in 2023. Since 2021, M&A volume has dropped by 40%, largely due to many leading companies being in the midst of large acquisitions and integrations, which limits new deal-making.

Stryker, the largest orthopedic company, has made recent acquisitions, like Artelon, to strengthen its sports medicine and foot and ankle segments. Its purchase of Vertos Medical highlights a focus on interventional treatments and later-stage investments. Enovis has also been active, acquiring LimaCorporate to expand its joint replacement business, though the integration has presented challenges. Smith+Nephew, ranking second in sports medicine, has enhanced its portfolio with knee cartilage regeneration technology.

Despite interest in acquisitions, experts predict that M&A activity will remain low into 2025. The market lacks viable targets that either provide immediate revenue growth or offer highly differentiated technologies.

5 reasons why M&A activity has slowed in 2024

The decline in M&A activity stems from a combination of factors. Here are five key reasons why M&A activity has slowed down in the orthopedics space in 2024:

  1. Large Acquisitions and Integrations: Many leading orthopedic companies are in the process of integrating previous large acquisitions, which often takes time and resources. This can temporarily reduce their appetite for new deals while they focus on smoothing out these complex transitions.
  2. Limited Attractive Targets: There is a scarcity of high-quality acquisition targets that meet the necessary criteria, such as offering immediate revenue growth or having highly differentiated technology. This limits opportunities for new mergers or acquisitions.
  3. Increased Competition in Key Segments: Segments like sports medicine and foot and ankle treatments have become more competitive. Companies may be more cautious about entering crowded markets through acquisitions without a strong strategic advantage.
  4. Economic Uncertainty: Broader economic challenges, including inflation, rising interest rates, and healthcare market pressures, may have created a more cautious investment environment. Companies are prioritizing fiscal responsibility and are less willing to take risks on acquisitions.
  5. Focus on Organic Growth and Innovation: Some companies are shifting their focus from external acquisitions to internal growth, concentrating on innovation, new product development, and improving their existing operations rather than pursuing costly acquisitions.

These factors combined have contributed to a notable slowdown in M&A activity in the orthopedic industry this year.