ArchiMed SAS's roughly $1.2 billion all-cash deal to take Natus Medical Inc. private may spark a revival of large medical technology buyouts as the sector is expected to see meaningful recovery from the pandemic.
An affiliate of the French private equity firm agreed to pay $33.50 per Natus common share, reflecting a 29% premium to the medical device company's April 14 closing stock price. The timing of the deal, which was announced April 18, surprised analysts, but some say the transaction delivers substantial value to shareholders.
The purchase price values Natus at approximately 2.1x its 2021 sales and roughly 12.6x its 2022 estimated EBITDA, according to a research note by Raymond James analyst Jayson Bedford. In contrast, the company's organic revenue growth has averaged about zero percent over the past eight years, which has weighed on the stock, he added. The deal comes a few months after Tom Sullivan was hired as Natus' new CEO and launched a strategic realignment with the goal of accelerating the company's revenue growth to the 5%-6% range.
"As it relates to the rest of the Med Tech group, we are reluctant to read too much into this deal given that [Natus] is viewed as a bit of a "one off," with virtually no direct public competitors," Bedford wrote. "That said, it is nice to see that PE is taking more of an interest in the group."
The pace of large private equity buyouts in the medtech sector has been slow, with billion-dollar deals generally spread out over a few years since 2005, according to S&P Global Market Intelligence data.
Prior to the ArchiMed-Natus transaction, the last billion-dollar medtech deal struck by a private equity firm was in November 2019, when Baring Private Equity Asia agreed to acquire Lumenis Ltd. for about $1 billion.
The largest of these deals since 2005 was Biomet Inc.'s acquisition by an investor group including Blackstone Inc., KKR & Co. Inc. and TPG Capital LP in an $11.33 billion deal that closed in September 2007.
The overall healthcare industry, including the medtech segment, is expected to continue to benefit from strong investor appetite due to its high returns, resilience to recession, aging populations and the rise of chronic diseases, according to a recent Bain report.
