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Dealmaking on a Small Planet: Medical Device Transactions 2001

Dealmaking in the device industry is occasional and incremental when compared with the level of activity in pharmaceuticals, the result of that industry's maturing into a handful of dominant players, not all of which see acquisitions as strategically critical to their long-term success. The less-than-robust public market for small device companies is both symptom and cause of the device dealmaking lull. Because the markets they target are generally too small to sustain years of significant growth, few investors are willing to invest in them as stand-alone companies. And without long-term investor support, smaller firms have few options other than to sell out to large companies and little negotiating leverage when they do so.

To better understand medical device dealmaking as it has evolved over the past two years, one need only compare it to the activity in pharmaceuticals. In the medical device industry, which has matured into a handful of utterly dominant players, dealmaking is occasional and incremental; in the pharmaceutical business, which is in strategic, tactical, and scientific turmoil, it is constant and frequently transforming.

The difference is due, in part, to the relative strategies and philosophies of each industry's largest players. As the device...

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