Key MedTech Merger and Acquisition differences between Europe and the USA

There are several key differences in MedTech M&A between Europe and the USA, primarily related to regulatory frameworks, deal structures and market dynamics.

Regulatory Differences
 

USA: The Food and Drug Administration (FDA) is a centralized authority with a predictable, though rigorous, regulatory pathway. The FDA has actively tried to make the U.S. an attractive market for new medical devices, particularly for innovative technologies like AI-enabled devices. 
 
Europe: The regulatory landscape in Europe has become more complex with the introduction of the EU Medical Device Regulation (MDR) in 2021. The MDR replaced the previous Medical Device Directive (MDD), making the approval process stricter, requiring more clinical data, and extending time-to-market. This has led some companies to prioritise U.S. market entry over Europe.

Deal Structure Differences

Purchase Price Adjustments: In the U.S., purchase price adjustments (PPAs) are almost universal, with buyers expecting to be compensated for shortfalls in working capital or cash. In Europe, "lock box" structures are more common, especially in competitive auctions.

Earn-outs: While common in both markets, the metrics used for earn-outs differ. In the U.S., revenue-based earn-outs are more prevalent, whereas in Europe, EBIT/EBITDA is the preferred metric.

Liability Caps: U.S. deals often have lower seller liability caps (10% or less of the purchase price), largely due to the widespread use of representations and warranties (R&W) insurance. In Europe, liability caps are typically higher (25% to 50%), as sellers are more accustomed to bearing more risk, although R&W insurance is becoming more common.

Material Adverse Change (MAC) Clauses: MAC clauses are standard in nearly all U.S. deals, allowing a buyer to back out if the target company experiences a significant negative change between signing and closing. These clauses are rare in Europe.

Dispute Resolution: In the U.S., litigation is the default for dispute resolution. In Europe, arbitration is much more common, particularly in cross-border transactions.

Market Dynamics

Profitability: U.S.-based MedTech companies generally have higher operating margins than their European peers. This is largely attributed to better access to the lucrative U.S. market, where medical device prices are typically higher due to a different healthcare system.

Market Fragmentation: The European MedTech market is more fragmented, with a large number of small and medium-sized companies. In contrast, the U.S. market is larger and less fragmented. This can impact the scale of acquisitions and the types of companies being targeted.

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