Health Tech: Aluna inhales $15M

After a lackluster 2022, the health care deal market will be defined this year by cash-rich strategics making calculated bets, a Bain & Co. report predicts.

Why it matters: Strategics are already primed to lead more venture capital raises, and their balance sheets suggest they’ll be active buyers, too, Claire writes.

• The report surveyed about 300 M&A executives globally across industries on their 2023 outlook and priorities.

Zoom in: Payers sat on the deal sidelines in 2022, but the top 25 health insurers have a combined $200 billion on their balance sheets, the report says.

• Given the mammoth size of the major players, maintaining competitive advantage and moving the needle on revenue will require a large buy.
• A merger of equals would likely not pass regulatory muster, but expect payors to make large buys in adjacent markets (UnitedHealthGroup-owned Optum’s playbook is a good one to look at).

Meanwhile, med tech M&A last year was primarily “designed to provide innovative technologies for future growth” rather than add products to portfolios, the report says.

• The report cites Stryker’s $3 billion acquisition of Vocera Communications as one example.

What they’re saying: “There is a lot of convergence between digital health and med tech,” Andreessen Horowitz general partner Julie Yoo said at an SVB webinar last week.

• Best Buy paid $400 million for remote patient monitoring technology vendor Current Health last year, and Biofourmis raised $320 million in Series D capital from General Atlantic and Intel at a valuation of nearly $1.3 billion.
• “The hybrid business models actually mitigate a lot of the risk of why people traditionally might not have been leaning into med tech, where you have manufacturing risk and supply chain risk,” Yoo says.

Yes, but: Don’t count out private equity competition, the report cautions.

• “Strategic buyers hoping for a steal should be prepared for increased competition from financial buyers as the year unfolds,” it says, citing continued record amounts of dry powder and a willingness to pay for good-quality assets.