Merger and acquisition activity

Over the last few years, merger and acquisition activity has been strong in medical device contract manufacturing.

Cherry Tree Securities’ research identified 82 deals since the beginning of 2005. The factors that spurred activity in 2005 and 2006 are continuing to drive acquisitions in this industry for the following reasons.

1. The advantages of multispecialty large contract manufacturing capability puts pressure on smaller, specialized shops.

2. Limited resources at smaller, private companies affect their ability to keep up with their customers’ growth demands.

3. Collaborative relationships between contract manufacturers and their customers create customer concentration and increase risk for small manufacturers.

4. Ever-changing designs and customer technologies make contracting more risky because they cannot rely on long product life cycles for investment payback.

5. $120 billion in capital was raised in 2006, pressuring investors to make acquisitions.

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