As interest rates rise and a recession looms, private equity firms in the life sciences sector remain optimistic about the potential for medtech investments. In 2021, private equity deals in this space reached a record high of $26 billion, reflecting a growing interest in the transformation of the healthcare industry.

Medtech investments are not without their challenges, however. Due diligence in this space can be complex as it involves assessing the security of intellectual property, which can be difficult to determine. Lamar Stanley, Director at Lead Capital Partners, commented that “Oftentimes, it requires hours and hours of study into contracts, patents, trademarks, consulting agreements, etc., and because medtech continues to explode as a sector, the IP landscape for specific opportunities is constantly changing.”

PE firms will often work with interdisciplinary teams to get a comprehensive view of a medtech company’s products and their potential for commercial success. Asif Zaman of PPC Enterprises stated that “it is extremely important to understand where a company’s products are in their life cycle. Getting feedback from the physicians, sales reps, and key opinion leaders that work with those products in the field is essential to understanding the product’s efficacy, popularity and future commercial success.”

Despite the complexities, medtech companies continue to be highly attractive targets for private equity firms. According to Zaman, “Platforms with differentiated technical capabilities or serving niche end-markets always stand out.” In addition, firms are attracted to the perceived social impact of a prospective company. “Primarily, we are most focused on finding opportunities that help payers, providers and/or the patients. If there is a medtech opportunity that is meaningfully improving patient outcomes, we’re going to be interested” said Stanley.

As the future of medtech investing remains uncertain, private equity firms can maximize their chances of success by selecting a team of trusted advisors and taking a strategic approach to investments in this sector. The combination of technical expertise and a focus on patient outcomes creates a unique opportunity for PE firms to play a critical role in shaping the future of healthcare.