ARTICLE
Where private equity is finding value in MedTech
September 18, 2026
Read time: 13 min
MedTech investment trends: Part 1
MedTech’s reset is creating openings for private equity, but disciplined diligence will separate opportunity from risk.
Private equity is putting more money into MedTech, but that capital is concentrating around fewer, bigger deals in faster-growing categories.
In the first half of 2026, MedTech mergers and acquisitions (M&A) value was roughly 160% higher than the same period in 2025, while the number of deals increased just 5%. Average deal value more than doubled, from slightly less than $1 billion to approximately $2.1 billion, according to EY and Capital IQ data.
These numbers point to a more selective MedTech market. Investors are focused on finding innovative businesses with strong growth prospects and recurring revenue models, while large MedTech companies are repositioning their portfolios toward faster-growing areas such as cardiovascular care, neurostimulation, and connected care.
Two key transaction strategies are emerging: carve-outs/divestitures and take-privates.
Recent transactions (including Blackstone and TPG’s acquisition of Hologic and American Industrial Partners’ agreement to acquire Avanos Medical for approximately $1.27 billion) demonstrate the scale of sponsor interest. KKR’s recently announced, approximately $5.7 billion acquisition of Integer further highlights the breadth of private capital moving into the MedTech ecosystem, including medical device contract manufacturing and refurbishing.
MedTech deal opportunities are plentiful, but to find the right ones and capitalize on them, investors need a disciplined targeting framework – including an in-depth understanding of all operational, regulatory, and execution risks.
What it looks like in practice
Acquiring a MedTech division or product line instead of the whole company.
Why strategics are selling
Through the first half of 2026, MedTech equities have been trading at a discount to the S&P 500. Large MedTech companies are increasingly focused on reducing portfolio complexity and are allocating resources to faster-growing areas or a subset of their overall portfolio. As a result, divisions or product lines that perform well but no longer fit the growth profile or long-term strategy of a publicly traded MedTech may become acquisition opportunities.
Why it appeals to PE firms
Carve-outs can provide established products, customers, regulatory clearances, and market share without purchasing an entire company. Buyers can grow the business through new products, new markets, or add-on acquisitions rather than relying mainly on cost-cutting measures. In many instances, a carve-out can even serve as a platform acquisition, delivering sufficient assets, operational capabilities, and financial scale to enter an attractive market segment.
What you should know
Buying a carve-out means separating a business from a larger, integrated enterprise, which involves complexities that can affect price, timing, and key deal terms. Buyers should understand:
- What comes with the business, including products, customers, permits, contracts, employees, real estate, and core technology (including owned, licensed, and commingled intellectual property)
- Where the acquired business still depends on the parent company (and for how long)
- What must be replaced after closing, including regulatory approvals, manufacturing support, intellectual property, documented quality controls, and operating systems
What it looks like in practice
Public MedTech companies going private.
Why the opportunity exists
Take-private opportunities in MedTech can emerge when the public market is not giving full credit to a company’s products, technology, or long-term growth prospects. The market may be focused on near-term earnings pressure, reimbursement uncertainty, uneven procedure volumes, or regulatory concerns – even though the underlying business still has durable assets and room to grow.
Why it appeals to PE firms
Buyers acquire a public platform at a valuation that may not reflect its longer-term potential and then support a multi-year value-creation plan outside the public markets. Taking the company private can give management more room to invest in research and development (R&D), improve commercial execution, pursue acquisitions, or reposition the business without the same quarter-to-quarter pressure.
What you should know
A lower stock price does not automatically mean the company is a bargain. Diligence should test whether the valuation gap reflects temporary market pressure or deeper issues, such as reimbursement risk, product performance, anticipated regulatory shifts, or a weaker pipeline.
Take-privates also require sponsors to manage a public-company process, not just negotiate a private acquisition. Financing, approvals, disclosure obligations, timing, and the possibility of a competing bid can all shape the deal.
Why it matters for investors: These considerations should feed directly into valuation and deal structure. If a target has weak reporting practices, unresolved inspection exposure, recurring quality issues, or a regulatory strategy that depends on untested assumptions, the buyer may seek a lower price, stronger deal protections through indemnification, more complex closing conditions, or a larger post-closing investment plan.
1. FDA scrutiny is shifting, not disappearing
For MedTech buyers, US Food and Drug Administration (FDA) diligence should go beyond whether approvals are in place. Recent FDA enforcement and inspection changes make a company’s regulatory and quality habits central to its value.
Trial-results reporting is a prime example. The FDA recently contacted more than 2,200 sponsors and researchers about thousands of studies that had missing required results or unresolved quality-control issues on ClinicalTrials.gov. Buyers should check whether a target has kept up with disclosure obligations and whether any gaps point to broader compliance weaknesses.
Buyers should also know that the FDA’s device inspection program has moved away from the old Quality System Inspection Technique (QSIT) checklist model and puts more weight on patient risk and real-world signals, including recalls and adverse-event reports. Issues in those areas can move a company to a higher priority on the FDA’s inspection radar. The FDA has already begun inspecting and issuing warning letters under the new Quality Management System Regulation that went into effect in February 2026.
Naturally, enforcement issues can affect valuation. Enforcement issues can affect valuation. A reporting failure can become a pricing issue, an indemnity issue, or a reason to walk away (as demonstrated by a March 2026 deferred prosecution agreement tied to allegedly unfiled adverse-event reports).
2. FDA scrutiny extends to AI
AI-enabled devices and diagnostics are another area where the regulatory path can shape value. For example, the FDA has finalized guidance on predetermined change control plans for AI-enabled device software, giving companies a clearer way to plan for certain model updates up front, facilitating product evolution and growth.
Why it matters for investors: For large language model (LLM) based medical products, the FDA’s digital mental health work offers an important signal about where the FDA may focus next (although it remains preliminary). The key question for investors is whether a business can keep the technology current while staying within FDA expectations. FDA’s very recent discussion paper on generative AI-enabled medical devices is a clear indicator that the agency is working toward regulating the technology – with questions remaining around when and how that will unfold.
3. The MedTech customer is changing, too
Buyers looking to invest in MedTech should be aware of another important shift that is happening on the demand side, where the continued focus on site neutrality is moving more procedures out of hospitals and into ambulatory surgery centers (ASCs) and other outpatient settings.
The Centers for Medicare and Medicaid Services (CMS) has proposed continuing to phase out Medicare’s inpatient-only list, including removing another 638 services. Alongside the 2026 ASC Covered Procedures List expansion, this could move more procedures into lower-cost outpatient settings and push hospitals to shed non-core equipment and service businesses.
Why it matters for investors: As care moves beyond hospitals, device purchasing may move with it. ASCs and free-standing sites have different budgets, buying priorities, and service needs, which can change how MedTech companies must price, sell, and support their products.
MedTech’s M&A market is becoming more concentrated, but the opportunity for private equity is expanding in important pockets. Strategic portfolio reshuffling is bringing carve-out candidates to market, while public valuations are creating openings for take-private transactions.
As more high-quality assets come to market, competition and increased scrutiny will follow. Sponsors must be well prepared long before a deal is on the table, including:
- Build FDA expertise into diligence early (along with reimbursement expertise, where relevant)
- Understand a carve-out’s operational and separation requirements (and the effect on deal terms, timing, and post-close plans)
- Pressure-test the value-creation plan against regulatory, reimbursement, and execution risks
The investors best positioned for the next phase of MedTech M&A will be those that understand not only where high-value assets are becoming available, but why, and what it will take to unlock that value.
To learn more about these trends and their implications for MedTech investors, contact the authors or your McDermott lawyer. We will also be discussing these developments and more at our upcoming Healthcare Private Equity NYC and Life Sciences Investment Forum.
