Medtech Industry Sees Shift in Funding and M&A Landscape, EY Report Reveals

Venture Capital Investments Concentrate on Fewer, Larger Deals

The medical technology sector is experiencing a significant transformation in its funding and merger landscape, according to a recent report by EY. The analysis, covering July 2024 to June 2025, reveals a notable trend of investors concentrating larger sums of money into fewer companies, effectively creating a divide between well-funded "haves" and struggling "have-nots" in the industry.

Venture capital investments in medtech firms reached $8.7 billion, marking a 20% increase compared to the previous year. However, the total number of funding rounds plummeted by 47%, with only 237 rounds recorded. John Babitt, EY's global medtech leader, noted, "I don't think I've ever seen as many hundred-million-dollar venture financing rounds." This shift favors technologies in high-growth markets such as pulsed field ablation, robotics, diabetes management, and structural heart devices.

M&A Activity Sees Fewer but Larger Deals

The mergers and acquisitions landscape mirrored the funding trend, with overall M&A spending and deal volume declining year-over-year. The number of medtech mergers dropped by 41% to 61, yet the average deal size surged to $636 million. This increase was driven by significant acquisitions like Stryker's $4.9 billion purchase of Inari Medical and Thermo Fisher Scientific's $4.1 billion acquisition of Solventum's purification and filtration business.

The report authors noted that most acquisitions targeted assets close to profitability, indicating a more cautious approach by buyers in the current economic climate. Despite the overall slowdown, the medtech sector saw eight companies go public, suggesting a potential reopening of the IPO window after a multi-year lull. Notable IPOs during this period included Beta Bionics, Ketstra Medical Technologies, and Ceribell.

Tariff Uncertainty and Regulatory Decisions Loom Over the Industry

The medtech sector faces ongoing challenges related to tariff policies and regulatory decisions. Uncertainty surrounding the Trump administration's tariff policy led to a slowdown in dealmaking during the spring, as companies struggled to agree on valuations. Arda Ural, EY Americas life sciences leader, stated that the current impact of tariffs is "somewhat muted," with companies adopting varied strategies to manage the levies.

However, significant regulatory decisions are on the horizon. In November, the Supreme Court will hear a case on the legality of using the International Emergency Economic Powers Act (IEEPA) to implement tariffs, a move that has raised constitutional questions. Additionally, the Trump administration has recently opened a Section 232 investigation into medical equipment, potentially signaling future tariff increases for the medtech industry.

John Babitt commented on the investigation, stating, "There are still a lot of unknowns, and we remain optimistic that the MedTech industry is in a position to withstand some headwinds." As the industry navigates these challenges, companies are focusing on raising larger venture rounds or acquiring later-stage assets with clear paths to profitability.