Will Abbott Have a Strong Year for M&A?

Undoubtedly, 2023 was a sluggish year for M&A in the medical device industry.

Medtech companies spent about 28% less in deals in 2023 than in 2022, according to a study from EY titled M&A Firepower.

However, recent comments from Abbott Laboratories CEO Robert Ford could be a sign that more medical device companies are willing to loosen the purse strings to engage in more dealmaking activity.

During a 4Q23 earnings call, Ford was asked by an analyst about Abbott’s strong balance sheet, which was described as “$20 billion worth of firepower”, and if that would prompt the company to become involved with acquisitions this year.

“We have great organic opportunities here to be able to kind of drive top-tier sustainable growth,” Ford said according to a Seeking Alpha Transcript of the call. “So that ends up allowing us to be in a selective position here, where we're not trying to use M&A as a way to kind of bulk up our top-line or to cover any kind of top-line gaps that might be there. So that allows us to be more selective. And if there are opportunities that fit strategically and can generate an attractive return, then like you said, you've done the math. We've got the flexibility and the firepower to do that.”

How Abbott Got Here

Abbott is one of the few companies in the medical device space that saw little to no disruption during the pandemic. Part of the reason is because of its diversified portfolio. The company was well-positioned with its COVID-19 tests at the onset of the pandemic. When the demand for COVID-19 tests began to wane – the company could fall back on its structural heart offerings and its continuous glucose monitoring (CGM) technology.

Marie Thibault, an analyst with BTIG wrote in a research note, that there was a lot to like about Abbott as the firm reported a total revenue beat in (4Q24), with the outperformance led mainly by most Device and Diagnostics segments.

One of the company’s strongest products driving revenue is the Freestyle Libre CGM. In a 4Q23 earnings call, Ford touted the success of the Freestyle Libre CGM.

“In diabetes care, fourth-quarter sales of Freestyle Libre, our market-leading continuous glucose monitoring system grew 24% and ended the year with global sales surpassing $5.3 billion,” Ford said according to a Seeking Alpha transcript of the call. “In terms of sales dollars, Libre has become the most successful medical device in history, and it has outpaced market growth in 13 out of the last 16 quarters.”

Conditions Ripe for an uptick in M&A

In a Q&A posted to MD+DI in January, John Babitt, commenting on the industry as a whole, noted that deal activity could increase in medtech.

Babitt said, “With significant cash balances on hand (see EY Firepower) and improving profitability from lower inflation and better product pricing [these] should all contribute to a productive 2024 medtech M&A environment.”