Medical Technology M&A Review Q3 2015 · Universal Container Corporation. Medical Technology –...

Medical Technology M&A Review Q3 2015

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Mike Brooks 312.602.3644 [email protected]

About PMCF

P&M Corporate Finance (“PMCF”) is an investment banking firm, focused ex-clusively on middle market transactions, with professionals in Chicago, Detroit, and across the globe through Corporate Finance International associates. Our deep knowledge of the medical technology market covers a wide range of sectors, including contract manufacturing & research, medical devices, in vitro diagnos-tics and life science instruments. Offering a depth of advisory services, PMCF has helped clients worldwide meet their sale, acquisition, financing, and strate-gic alliance goals. Additional information on PMCF can also be found by visiting our website, www.pmcf.com.

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Medical Technology – M&A Review Q3 2015

2

Venture Capital

Activity Overview – Broad EconomyThrough the first nine months of 2015, the value of venture capital investments across all indus-tries increased +34.4% (+$12.1 billion) over the same period in 2014, driven primarily by a sig-nificant increase in venture dollars invested in the software industry (+$4.0 billion), consumer prod-ucts and services (+2.0 billion), and biotechnology (+$1.5 billion). The $47.2 billion invested in the first three quarters of 2015 is higher than each of the full year totals for 17 of the last 20 years.

The top 10 deals accounted for 19% of dollars in-vested in Q3 2015, down from 24% of total ven-ture capital deployed in Q2 2015. As has been the recent trend, the software industry received the highest level of funding ($5.8 billion) across 412 deals, despite being down -20.5% in dollars and -17.1% in deals compared to Q2 2015. Overall, the third quarter of 2015 represented the seventh consecutive quarter of more than $10 billion of venture capital invested in a single quarter. Early stage deals were the most active by stage of devel-opment, with 558 transactions in Q3 2015.

Venture capital investment represents an alterna-tive asset class that is not correlated to market returns, and as such, the total number of in-vestments made is not the best proxy to monitor changes in investor sentiment. Changes in invest-ment dollars, however, provide a clearer picture as to directional trends. For the first nine months of 2015, venture capital funding dollars in early stage companies grew +52.2%, followed by ex-pansion stage and later stage, with +37.8% and +25.4% increase in dollars invested, respectively. However, seed stage investments declined -35.1%. The median pre-money valuation for Series D+ deals reached $400 million in Q3 2015, as mature companies with adequate financials, continue to turn to venture capital investors for financing.

Medical Devices & Equipment SegmentDespite four less deals in Q3 2015 compared to Q2 2015, venture capital investment in medical devices and equipment reached $821.5 million in Q3 2015. The value of venture capital investments in medical devices and equipment represented 5.0% of total venture investment in Q3 2015, up from 4.6% in Q2 2015.

OutlookVenture capital funding is expected to continue its growth through the remainder of 2015 and in to 2016, as non-traditional investors continue to tap the market. Median valuations should continue to strengthen as these investors crowd into earlier stages of development and more companies choose to stay private longer.

Stage DefinitionsStart-up/Seed: The company has a concept or product under development, but is likely not fully operational. Typically in existence less than 18 months. Early: The company has a product or service in testing or pilot production. In some cases, the product may be commercially available. May or may not be generating revenue. Typically in business less than three years.Expansion: Product or service is in production and com-mercially available. The company demonstrates significant revenue growth, but may or may not be showing a profit. Typically in business more than three years.Later: Product or service is widely available. Company is generating ongoing revenue; potentially positive cash flow. More likely to be, but not necessarily, profitable. May include spin-offs of operating divisions of existing public companies and established private companies.

Source: Thomson Reuters, VentureSource, Cooley and PitchBook. Excludes “Specialized Sectors.”

Source: Thomson Reuters & National Venture Capital Association

Number of Investments by Stage of Development

200

400500

300

100

Q2’14

Q1’14

Q4’13

Q3’13

Q2’13

Q1’13

Q4’12

Q3’12

Q2’12

Q1’12

Q1’15

Num

ber

of In

vest

men

ts

ExpansionSeed Later StageEarly Stage

0

700600

Q3’14

Q2’15

Q3’15

Q4’14

Source: Cooley Godward Kronish, LLP

Median Pre-Money Valuation by Series

Series CSeries A Series D+Series B

$100

$200$150

$50

Q1 2015 Q2 20152011

Valu

atio

n ($

mm

)

2012 2013 2014

$400

$300$350

$250

Q3 20150

Source: Thomson Reuters & National Venture Capital Association

0

40

80

120

20

60

100

Num

ber

of In

vest

men

ts

Number of Investments Investment Dollars

$600

$1,400

$1,000

$400$200

Inve

stm

ent

Dol

lars

($m

m)

$0Q2’14

Q1’14

Q4’13

Q3’13

Q2’13

Q1’13

Q4’12

Q3’12

Q2’12

Q1’12

Q1’15

$1,200

$800

Q3’14

Q4’14

Q2’15

Q3’15

VC Investment in Medical Device & Equip.


PMCF

3

Medical Device Public Comparables

Diversified Medical Device Public Comparables Summary

Source: S&P Capital IQ, Company Reports

Cash($MM)LTM as of Debt

($MM)Market Cap

($MM)TEV

($MM)TEV/REV

TEV/EBITDA P/ECompany Name

Boston Scientific CorporationCR Bard Inc.Intuitive Surgical, Inc.Johnson & JohnsonMedtronic plcSmith & Nephew plcSt. Jude Medical Inc.Stryker Corporation

High Mean Median Low

9/30/20159/30/20159/30/20159/27/20157/31/20159/30/20157/4/20159/30/2015

350 1,003 1,740

37,306 17,987

120 934

3,374

37,306 7,852 1,371

120

5,859 1,410

0 19,935 35,600 1,480 3,741 3,490

35,600 8,939 3,616

0

27,563 14,231 15,273

241,125 112,240 16,972 20,582 35,550

241,125 60,442 24,073 14,231

27,939 12,970 16,296

255,614 121,719 16,614 23,286 35,354

255,614 63,724 25,612 12,970

3.6x4.2x6.8x3.4x4.9x3.8x3.7x3.5x

6.8x4.2x3.8x3.4x

15.1x13.5x20.6x10.4x16.0x13.4x12.0x13.2x

20.6x14.3x13.4x10.4x

NM41.1x34.2x16.4x31.1x29.3x17.6x38.6x

41.1x29.8x31.1x16.4x

Public trading multiples for the Diversified Medical Device (“DMD”) comparables maintained strong levels in Q3 2015 as average EV/EBITDA and EV/Revenue multiples were 14.3x and 4.2x, respectively. Q3 2015 EV/EBITDA decreased slightly from a year ago, when EV/EBITDA multiples finished Q3 2015 at 14.5x. Average EV/Revenue multiples also decreased in the period, with Q3 2015 averaging 4.2x compared to 4.5x and 4.6x in Q2 2015 and Q1 2015, respectively.

The PMCF DMD Index underperformed the S&P 500 Growth Index through the first three quarters of 2015 although both indexes were down year-to-date. The DMD Index finished down -4.9% at the end of Q3 2015, compared to -3.3% for the S&P 500 Growth Index.

4.6x

0.0x

5.0x

10.0x

20.0x

Average Enterprise Value/EBITDA Average Enterprise Value/Revenue

Q1 ‘152011 2012 2013 Q1 ‘14 Q2 ‘14

9.9x 9.8x

12.4x13.5x 14.3

15.4x 15.2x

4.5x

14.3x

4.2x3.3x 3.3x 3.6x 3.9x 4.0x 4.4x

14.5x

4.0x

15.0x15.3x

Q2 ‘15 Q3 ‘15Q3 ‘14 Q4 ‘14

Diversified Medical Device Public Trading Multiples

Diversified Medical Device Index

-5%

0%

10%

-10%Jan-15 Feb-15 Mar-15

5%

Jun-15Apr-15 May-15 Jul-15 Aug-15 Sep-15

PMCF Diversified Medical Device Index S&P 500 Growth Index (̂ SGX) –Index Value

www.pmcf.com


4

Orthopedic Medical Device Public Trading Multiples

Orthopedic Medical Device Index


Orthopedic Medical Device Public Comparables Summary



($MM)Market Cap

($MM)TEV

($MM)TEV/REV


Alphatec Holdings, Inc.Exactech Inc.Globus Medical, Inc.NuVasive, Inc.Orthofix International N.V.Smith & Nephew plcStryker CorporationWright Medical Group N.V.*Zimmer Biomet Holdings, Inc.


9/30/20159/30/20159/30/20159/30/20159/30/20159/30/20159/30/20159/30/20159/30/2015

11 17

239 337 64

120 3,374

254 1,810

3,374 692 239 11

80 21 0

372 0

1,480 3,490

566 11,915

11,915 1,992

372 0

33 245

1,964 2,360

636 15,612 35,434

NM19,102

35,434 9,423 2,162

33

126 249

1,726 2,403

573 16,972 35,550

312 29,208

35,550 9,680 1,726

126

0.6x1.0x3.5x3.1x1.5x3.8x3.5xNM

6.3x

6.3x2.9x3.3x0.6x

5.4x5.8x

10.1x16.4x30.8x13.4x13.2x

NM16.1x

30.8x13.9x13.3x5.4x

NM15.4x19.9x50.4x

NM29.3x38.6x

NM47.7x

50.4x33.5x34.0x15.4x

Average EV/EBITDA multiples for the Orthopedic Medical Device (“OMD”) comparables increased to the highest levels of 2015, increasing to 13.9x in Q3 2015 from 12.9x in Q2 2015. The increase was primarily driven by Orthofix, which has increased its EV/EBITDA by approximately 12.0x turns since Q2 2015. Average EV/Revenue multiples have been flat since Q4 2014 at 2.9x.

The PMCF OMD Index has underperformed the S&P 500 Growth Index throughout most of 2015, finishing Q3 2015 down -4.8% compared to -3.3% gains for the S&P 500 Growth Index year-to-date.

*Wright Medical suspended trading on September 30, 2015, after approval was granted for its merger with Tornier NV.


13.4x 12.9x

8.6x 8.8x

11.9x13.3x

14.3x 13.5x

2.9x 2.9x1.6x 1.7x 2.4x 2.7x 2.7x 2.6x

14.0x

2.9x

Q1 ‘152011 2012 2013 Q1 ‘14 Q2 ‘14 Q2 ‘15

13.9x

2.9x

Q3 ‘15Q3 ‘14 Q4 ‘140.0x

5.0x

10.0x

20.0x

15.0x

-5%

0%

10%

-10%Jan-15 Feb-15 Mar-15

5%




PMCF

5

Cardiovascular Medical Device Public Comparables Summary



($MM)Market Cap

($MM)TEV

($MM)TEV/REV


ABIOMED, Inc.AngioDynamics Inc.Cardiovascular Systems Inc.CryoLife Inc.Edwards Lifesciences Corp.Endologix Inc.LeMaitre Vascular, Inc.Merit Medical Systems, Inc.Thoratec Corp.Vascular Solutions Inc.


9/30/20158/31/20159/30/20159/30/20159/30/20159/30/20159/30/20159/30/20157/4/20159/30/2015

176 22 77 38

1,251 68 24 6

274 40

1,251 198 54 6

0 137

0 0

605 73 0

210 0 0

605 102

0 0

3,901 478 514 289

15,286 831 216

1,056 3,466

561

15,286 2,660

696 216

3,725 592 438 250

14,640 836 192

1,260 3,192

521

14,640 2,565

714 192

14.7x1.7x2.4x1.8x6.0x5.5x2.6x2.4x6.6x3.9x

14.7x4.7x3.3x1.7x

NM11.6x

NM24.1x21.8x

NM15.0x14.3x45.3x17.7x

45.3x21.4x17.7x11.6x

NMNMNM

85.6x35.4x

NM37.3x36.3x

NM45.7x

85.6x48.1x37.3x35.4x

Average EV/EBITDA multiples for the Cardiovascular Medical Device (“CVMD”) comparables increased for the fourth consecutive quarter in Q3 2015, averaging 21.4x in the period compared to 19.8x in Q2 2015 and 13.7x in Q3 2014. Thoratec, a leader in mechanical circulatory heart support products, showed a large increase in its EV/EBITDA multiple, increasing from 28.1x in Q2 2015 to trading at 45.3x in Q3 2015 after a July announcement that it would be acquired by St. Jude Medical.

The PMCF CVMD Index continued its strong performance in Q3 2015, ending the quarter +24.0% year-to-date. After a significant drop-off in late April, which was driven by a nearly 7% drop in Edwards Lifesciences Corp. following their Q1 2015 earnings call which projected lower growth, the PMCF CVMD Index has shown a strong recovery through Q3 2015.

Cardiovascular Medical Device Public Trading Multiples

Cardiovascular Medical Device Index


0.0x

5.0x

10.0x

15.0x


16.7x

19.9x

11.1x

13.5x15.4x

14.5x 15.0x

4.0x 4.6x3.2x 3.2x 4.1x 3.6x 3.6x

13.7x

3.1x

Q1 ‘152011 2012 2013 Q1 ‘14 Q2 ‘14

20.0x

25.0x

18.0x

5.0x

Q3 ‘14 Q4 ‘14 Q2 ‘15

21.4x

4.7x

Q3 ‘15-5%

10%

5%

30%

20%

35%

25%

15%

0%

Jan-15 Feb-15 Mar-15 Jun-15Apr-15 May-15 Jul-15 Aug-15 Sep-15


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6

Diversified Diagnostic Public Comparables Summary



($MM)Market Cap

($MM)TEV

($MM)TEV/REV


Abbott LaboratoriesBecton, Dickinson and Co.Danaher Corp.Hologic Inc.Johnson & JohnsonLaboratory Corp. of America Novartis AGOrion OyjRoche Holding AGSOCO International plcThermo Fisher Scientific, Inc.


9/30/20159/30/20157/3/20159/26/20159/27/20159/30/20159/30/20159/30/20159/30/20156/30/20159/26/2015

6,139 1,463 3,342

492 37,306

713 5,932

246 9,428

147 503

37,306 5,974 1,463

147

8,355 12,822 3,163 3,674

19,935 6,681

22,701 245

23,819 0

13,321

23,819 10,429 8,355

0

59,946 27,892 58,240 11,027

258,496 10,966

221,124 5,328

224,010 785

48,727

258,496 84,231 48,727

785

62,270 39,251 58,132 14,209

241,125 16,950

237,966 5,327

240,778 638

61,545

241,125 88,926 58,132

638

2.8x4.2x2.9x5.3x3.4x2.4x4.8x4.8x4.7x2.1x3.7x

5.3x3.7x3.7x2.1x

12.4x16.3x12.6x14.6x10.4x12.0x14.0x15.2x12.6x3.1x

15.4x

16.3x12.6x12.6x3.1x

25.6x33.0x23.4x84.0x16.4x23.5x24.2x22.3x24.8x

NM25.0x

84.0x30.2x24.5x16.4x

Average EV/EBITDA multiples for the Diversified Diagnostic Medical Device (“DDMD”) comparables decreased in Q3 2015, dropping from 14.8x at the end of Q2 2015 to 14.0x at the end of Q3 2015. Average EV/Revenue also decreased slightly, ending Q3 2015 at 4.1x compared to 4.2x at the end of Q2 2015.

The PMCF DDMD Index has tracked closely with the S&P 500 Growth Index throughout 2015, with the PMCF DDMD Index underperforming slightly in Q3 2015, ending the period -4.9%. The S&P 500 Index ended Q3 2015 -3.3% for the year.

Diversified Diagnostic Public Trading Multiples

Diversified Diagnostic Medical Device Index



12.5x 13.2x12.2x

9.6x10.3x

11.6x12.4x 12.4x

3.6x 3.9x4.7x3.0x 3.1x 3.3x 3.6x 3.6x

12.1x

3.5x

Q1 ‘152011 2012 2013 Q1 ‘14 Q2 ‘14 Q2 ‘15Q3 ‘14 Q4 ‘140.0x

5.0x

10.0x

20.0x

15.0x12.6x

3.7x

Q3 ‘15

-5%

0%

10%

-10%Jan-15 Feb-15 Mar-15

5%




PMCF

7

Mergers & Acquisitions

The number of Medical Device transactions increased in Q3 2015, with 154 transactions taking place in the quar-ter compared to 145 transactions in Q2 2015, an increase of +6%. Activity has reversed its trend of declining at the end of 2014 into the start of 2015, and this year is posi-tioned to be another banner year for Medical Device M&A. In an environment of continued globalization and higher demand for medical technology products and services, key players are feeling compelled to scale-up operations, gain market share and diversify their product portfolio in order to improve their negotiating power and comply with the demands of a value-based healthcare model. Strategic buyers have been driving M&A activity, and continue to deploy capital in a favorable lending environment.

Although average transaction value declined -13.3% from Q2 2015 to Q3 2015, total transaction value increased +33%, predominantly due to Dentsply’s acquisition of Sirona Dental Systems for $5.5 billion and SJM Interna-tional’s acquisition of Thoratec for $4.0 billion. Average TEV/EBITDA multiples increased slightly in Q3 2015 to 19.5x, up from 19.3x and 17.4x in Q2 2015 and Q1 2015, respectively. Average TEV/Revenue multiples decreased in Q3 2015 to 3.6x, down from 4.2x in Q2 2015. Year-to-date TEV/EBTIDA multiples averaged 19.1x through September, which is above the 16.6x average experienced through the first three quarters of 2014.

From Q1 to Q3 2015, M&A activity was spread evenly across product segments, with no one segment account-ing for more than 25% of overall transaction volume. The Equipment segment experienced the heaviest activity, accounting for 21%, followed by Therapeutic Device seg-ment, which accounted for 20% of transaction activity. The Therapeutic segment experienced the largest increase in transaction activity in Q3 2015 as the number of trans-actions doubled from 23 in Q2 2015 to 46 in Q3 2015. Contract Manufacturing has seen the largest year-over-year increase from 2014, as the number of transactions is up 88.5% through the first three quarters of 2015.

Key Themes in Q3 2015We continue to see significant transformation in the contract manufacturing/outsourcing market, driven by consolidation among OEM clients as well as sound mac-roeconomic conditions. This shift has been seen in Q3 2015 particulary among the most active Therapuetic and Equipment segments.

The largest transaction in the third quarter was the merg-er of Dentsply and Sirona to create the world’s largest dental consumables and equipment company in a $5.5 billion transaction, which continues the Medical Technol-ogy trend of multi-billion dollar deals seen over the past year. Conversely, a large number of transactions under $500 million paired with a high level of activity from stra-tegic buyers indicate that small players may opt to exit the market by selling to a larger competitor.

Source: S&P Capital IQ, PMCF

Medical Device M&A Transaction Statistics

Q3 ‘15Q1 ‘14 Q2 ‘14 Q3 ‘14 Q4 ‘14 Q1 ‘15Q1 ‘13 Q2 ‘13 Q3 ‘13 Q4 ‘130

40

20

60

80

120

140

100

160

180

0

$50

$100

$200

$150

$250

$300

$350

Ave

rage

Tra

nsac

tions

Val

ue (

$m

m)

Num

ber

of M

&A

Tra

nsac

tions

M&A Transactions Average Transaction Value

Q2 ‘15

Source: S&P Capital IQ, PMCFNote: Certain outliers have been removed

Transaction Value ($MM)

TEV/Revenue

TEV/EBITDA

Q3 15Q3 15Q2 15Q2 15Q1 15Q1 15Q4 14Q4 14Q3 14Q3 14Q2 14Q2 14Q1 14Q1 14

Q1-Q3 '15Q1-Q3 '15

Q1-Q3 '14Q1-Q3 '14

MeanMedianMeanMedianMeanMedianMeanMedianMeanMedianMeanMedianMeanMedian

MeanMedian

MeanMedian

3.60x2.05x4.18x1.50x2.27x2.24x4.52x2.18x5.18x2.43x9.36x2.52x3.89x1.93x

3.49x2.15x

6.75x2.08x

19.45x10.88x19.33x11.50x17.38x17.30x16.92x11.45x12.98x10.10x18.26x13.80x16.12x16.90x

19.09x14.35x

16.63x13.91x

$260.8 $47.1

$300.8 $58.1

$275.7 $15.6

$185.6 $35.1

$258.2 $20.2

$128.4 $17.8

$211.6 $32.1

$276.4 $29.7

$195.7 $20.2

Mean/MedianPeriod

Medical Device M&A Transaction Metrics

Transactions by Product Segment – H1 2015

Distribution5.0%

Equipment21.0%

Therapeutic Device20.0%

Diagnostic (non-imaging)

7.0%

Diagnostic (imaging)

5.0%

ContractManufacturing

12.0%

Consumable/Disp10.0%

Mobility/Rehab2.0%

Others2.0%

Service16.0%


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8

Medical Equipment M&A

Transactions by Buyer Type Transactions by End Market

Strategic Buyer Financial Buyer

101

5466

8580

1826

1214

17 17

0

20

40

60

120

80

100

2010 2011 2012 2013 2014

Num

ber

of D

eals

140

77

13

Q1-Q3 ‘15

Acute Care

Aesthetic

Furniture/Equipment

Monitor

Ophthalmology

Respiratory

Safety/Drug Delivery

Surgical

Wound Care

Other

Total

0

1

7

5

2

1

3

8

0

3

30

5

1

24

17

5

12

10

41

0

12

127

0

1

6

5

0

2

4

12

0

4

34

2014End Market Q1 ‘15 Q2 ‘15

1

0

4

5

0

1

4

9

0

2

26

Q3 ‘15

Q1-Q3 2014 Q1-Q3 2015Buyer Type

Private Acquirer50.0%

Public Acquirer36.7%

Private Equity10.0%

PE to PE3.3%

Int'l - to - Int'l

U.S. - to - Int'l

U.S. - to - U.S.

Int'l - to - U.S.

Total

45

6

59

17

127

14

1

9

6

30

2014 Q1 ‘15

11

2

8

5

26

Q3 ‘15Seller-to-Buyer

22

1

10

1

34

Q2 ‘15

Cross-Border Transaction Trends


Public Acquirer31.5% Private Equity

22.8%

PE to PE6.5%


Source: S&P Capital IQ, PMCFSource: S&P Capital IQ, PMCF



Trends in M&A:• M&A in the Medical Equipment sector was active through the first three quarters of 2015, although 90 transactions

through September 2015 were slightly below the 95 transactions seen over the same period in 2014.

• Strategic buyers maintained a high level of M&A activity in Medical Equipment, with 77 transactions occurring in Q1-Q3 2015.

• The Surgical sector continues to lead activity in 2015, with nine transactions in Q3 2015, followed by the Monitor sector with five transactions.

• Cross-border transaction volume grew in Q3 2015, with seven deals involving both U.S. and international parties, com-pared to two in Q2 2015.

Featured Sector Transactions:September 2015 — Zhong zhu Holding Co., Ltd. agreed to acquire Shenzhen-based ET Medical Technology Co., Ltd. from Shenzhen ET Investment Holding Group Co., Ltd, Shenzhen Jinyi Xinhe Investment Development Co., Ltd and Shenzhen ET Zhengrun Assets Management Co., Ltd. for $298 million in stock on September 21, 2015. Zhong zhu Holding Co., Ltd. will issue 130.76 million shares as consideration. ET Medical engages in tumor diag-nosis and treatment equipment, including sub-health rehabilitation systems and radiotherapy systems.

September 2015 — Valeant Pharmaceuticals International entered into a definitive agreement to acquire Synerget-ics USA, Inc. (NasdaqCM:SURG) from AWM Investment Company Inc., Nantahala Capital Management, LLC and others for approximately $170 million on September 1, 2015. “We are pleased to reach an agreement with Vale-ant, which is a logical partner to maximize our Company’s growth opportunities and, importantly, this agreement creates immediate and compelling value for our shareholders,” said David M. Hable, president and chief execu-tive officer of Synergetics. “The combined strengths of both companies will expand the breadth of our offerings and create a more effective competitor that is better able to meet our customers’ needs in the ophthalmology and neurosurgery markets.”


PMCF

9

Trends in M&A:• The Therapeutic Device sector was twice as active in Q3 2015, with 46 transactions compared to 23 in Q2 2015. With

83 transactions through Q3 2015, the sector has seen more transactions than in all of 2014.

• Transactions with financial buyers increased in Q3 2015, but Q1-Q3 2015 activity is still below 2014 levels.

• Transaction activity in Q3 2015 was primarily driven by Ortho and Ophthalmology, which had 12 and 11 transactions in the period, respectively.

• International deal volume grew in Q3 2015, with 22 transactions in the period. Domestic deals increased in Q3 2015 compared to Q2 2015, with 33% of transactions occurring within the U.S.



57

10695

6975

96

1819

0

20

40

60

120

80

100

2010 2011 2012 2013 2014

Num

ber

of D

eals

140

71

12

Q1-Q3 ‘15

22


Int'l - to - Int'l

U.S. - to - Int'l

U.S. - to - U.S.

Int'l - to - U.S.

Total

29

13

27

10

79

5

3

5

1

14

Seller-to-Buyer

11

3

8

1

23

2014 Q1 ‘15

22

6

15

3

46

Q3 ‘15Q2 ‘15


Source: S&P Capital IQ, PMCFSource: S&P Capital IQ, PMCF



Therapeutic Device M&A

Featured Sector Transactions:September 2015 — DENTSPLY International, Inc. (NasdaqGS:XRAY) agreed to acquire Sirona Dental Systems, Inc. (NasdaqGS:SIRO) in a merger of equals deal for $5.4 billion on September 15, 2015. Under the terms of the agreement, Sirona shareholders will receive 1.8142 shares of DENTSPLY for each existing Sirona share. Upon closing of the transaction, DENTSPLY shareholders will own 58% and Sirona shareholders will own 42% of the combined company. “We are excited about bringing together two industry leaders,” said Bret W. Wise, Chairman and Chief Executive Officer of DENTSPLY. “DENTSPLY SIRONA will offer a comprehensive line of solutions to more effectively meet the needs of dental professionals all over the world and advance patient care. With a strong financial profile, comprehensive product offerings and integrated solutions, DENTSPLY SIRONA will be uniquely positioned to make dentistry better, faster and safer around the world. I look forward to working with Jeff and the combined management team to deliver on this mission.”

July 2015 — SJM International, Inc. entered in a definitive agreement to acquire Thoratec Corp. (NasdaqGS:THOR) from Oracle Investment Management, Inc., SSgA Funds Management, Inc., T. Rowe Price Associates, Inc. and other shareholders for approximately $3.7 billion in cash on July 21, 2015.


1

6

1

0

4

11

12

0

1

10

46

Q3 ‘15

Aesthetic

Cardiovascular

ENT

Gastrointestinal

Neurovascular

Ophthalmology

Ortho

Safety

Wound Care

Other

Total

4

0

3

1

2

1

1

0

1

1

14

3

12

3

3

8

10

12

0

9

19

79

1

2

1

2

1

9

2

0

0

5

23

2014End Market Q1 ‘15 Q2 ‘15



PE to PE3.6%

Private Equity7.2%



Private Equity32.8%

PE to PE17.2%

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10

Consumable and Disposable M&A

Trends in M&A:• Consumable and Disposable M&A volume in Q3 2015 declined compared Q2 2015, with a total of 10 transactions.

• The biggest decrease in deal volume from 2014 has been in the Hospital Care and Surgical segments, which have seen six and three transactions through the first three quarters of 2015, respectively.

• Cross-border transaction activity involving U.S. domiciled companies continued to be limited, but increased to three transaction in Q3 2015, up from one in Q2 2015.



Int'l - to - Int'l

U.S. - to - Int'l

U.S. - to - U.S.

Int'l - to - U.S.

Total

33

1

20

4

58

8

0

10

2

20

7

1

4

0

12

5

2

2

1

10

Seller-to-Buyer 2014 Q1 ‘15 Q3 ‘15Q2 ‘15




Featured Sector Transactions:July 2015 — RoundTable Healthcare Partners III, L.P., fund of RoundTable Healthcare Management, LLC ac-quired TIDI Products, LLC on July 6, 2015. Joe Damico, Founding Partner and Co-Chairman of RoundTable, will serve as Chairman of the Board of TIDI. Kevin McNamara, President and Chief Executive Officer, TIDI will continue to lead the TIDI’s management team and will also serve on its Board of Directors. TIDI Products, LLC manufactures and supplies single-use infection prevention products for medical, dental, and foodservice markets. “RoundTable is an ideal partner for TIDI,” McNamara said in a statement. “RoundTable’s relationships, experience and resources will be significant assets for us as we work to expand our portfolio and further penetrate our target markets, particularly in acute care.”

July 2015 — Mediplast AB acquired Fenno Medical Oy from Jan Holmberg and Markku Heiskanen on July 1, 2015. Fenno Medical will continue as an independent subsidiary of Mediplast Ab and to which Mediplast’s exist-ing functions in Finland will be merged. Fenno Medical has sales of approximately $22 million. The acquisition entails strategic expansion in the Finnish market, boosting Mediplast’s and thus Addtech Life Science’s position as a leading Nordic medtech supplier.



4132

40

26 31

45

87

0

20

40

60

2010 2011 2012 2013 2014

Num

ber

of D

eals

80

33

9

Q1-Q3 ‘15

17



Drug Delivery

Home Health

Hospital Care

IVD

Safety/Inf. Control

Surgical

Wound Care

Other

Total

2

7

5

0

2

2

0

2

20

4

5

13

7

8

12

3

6

58

2014End Market Q1 ‘15

4

1

1

1

4

0

0

1

12

Q2 ‘15

2

0

0

0

3

1

1

3

10

Q3 ‘15



Private Equity19.0%

PE to PE2.4%



Private Equity20.6%

PE to PE17.6%

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This market overview is not an offer to sell or a solicitation of an offer to buy any security. It is not intended to be directed to investors as a basis for making an investment decision. This market overview does not rate or recommend securities of individual companies, nor does it contain sufficient information upon which to make an investment decision.

P&M Corporate Finance, LLC will seek to provide investment banking and/or other services to one or more of the companies mentioned in this market overview.

P&M Corporate Finance, LLC, and/or the staff who prepared this market update, may own securities of one or more of the companies mentioned in this market overview.

The information provided in this market overview was obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. It is not to be construed as legal, accounting, financial, or investment advice. Information, opinions, and estimates reflect P&M Corporate Finance, LLC’s judgment as of the date of publication and are subject to change without notice. P&M Corporate Finance, LLC undertakes no

obligation to notify any recipient of this market overview of any such change.

The charts and graphs used in this market overview have been compiled by P&M Corporate Finance, LLC solely for illustrative purposes. All charts are as of the date of issuance of this market overview, unless otherwise noted.

This market overview is not directed to, or intended for distribution to, any person in any jurisdiction where such distribution would be contrary to law or regulation, or which would subject P&M Corporate Finance, LLC to licensing or registration requirements in such jurisdiction.

The Diversified Medical Device Index, Orthopedic Medical Device Index, Cardiovascular Medical Device Index, and Diversified Diagnostic Index were developed by PMCF and may not be inclusive of all companies in these industries. They are not intended as composite indexes of these industry sector returns. Index and sector returns are past performance which are not indicators of future results.

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