The MedTech industry has spent decades obsessed with incremental product tweaks – a slightly sharper scalpel or more flexible stent. Today, the market is no longer rewarding standalone devices, but infrastructure. Paul Tomasic, Managing Director and Head of European Healthcare at Houlihan Lokey, outlines why the sector’s financial prize has shifted from hardware to the underlying digital and physical plumbing of healthcare.
For years, the MedTech industry has been defined by a cycle of incremental clinical improvement.
Success was measured by the “better mousetrap” – a slightly sharper scalpel, more flexible stent, or marginally more accurate sensor.
As we move into 2026, it is becoming clear that this era of standalone product excellence is no longer the primary driver of market value.
This fundamental shift isn’t accidental; it’s being driven by a powerful convergence of forces. On the one hand, relentless economic pressure and the transition to value-based care are forcing healthcare operators to seek not just incremental clinical gains, but also radical operational efficiency. They are now looking to MedTech as a core strategy to address their largest and most strained resource: their workforce.
On the other hand, this is only possible because technology has reached a tipping point. The convergence of cloud computing, artificial intelligence (AI), and a growing mandate for interoperability means we can finally move beyond isolated devices. We can now build connected systems that don’t just generate data, but also analyse, interpret, and seamlessly integrate it into the clinical workflow.
The most immediate manifestation of this shift is the rise of the procedural platform.
For most hospitals today, operational complexity is staggering. During a single complex procedure – whether in orthopaedics or interventional cardiology – a hospital’s procurement and clinical teams are often forced to manage an incredibly fragmented supply chain.
They may juggle relationships with up to 15 different vendors for a single operating room, resulting in 15 different contracts, 15 sets of inventories, and 15 potential points of failure on any given day. It is profoundly inefficient and, frankly, unsustainable.
Hospitals are now demanding simplicity over variety. The key question for new equipment is no longer just “What does this product do?”, but “How does this product fit into our existing system?”.
The market is moving towards a model where hospitals buy outcomes and efficiency rather than individual tools. This transition from fragmentation to integrated platforms is where the significant financial prize now lies.
Our analysis shows that MedTech companies with a clear platform strategy are not only growing faster, but also commanding exit multiples that are, on average, two to three turns higher than standalone product companies in the same vertical.
Perhaps the most profound change is the shift in the value of these workflows.
We are seeing a transformation of devices from simple hardware to data infrastructure. The buyer’s priorities are shifting accordingly; for many new device categories, seamless integration into the electronic medical record now outranks incremental clinical features as the top purchasing criterion.
This is act one of a larger story, where the data becomes more valuable than the device itself. MedTech firms are responding by transforming from industrial manufacturers into technology companies, aggressively retooling their talent base to hire for software and data science roles whilst hardware hiring remains flat.
The financial markets are rewarding this pivot with enormous premiums, valuing a recurring dollar of data revenue significantly higher than a one-time dollar of hardware revenue.
The goal is no longer just to build a device, but to build an ecosystem where the data infrastructure makes the system indispensable to both patients and clinicians.
Whilst data solves digital complexity, automation is addressing the crises of the physical world.
A hidden cost in healthcare is the burden on labs and factory-floor workforces. Recent analysis suggests that, in many quality control labs, more than 60 percent of a skilled technician’s time is spent on manual sample handling, tracking, and documentation rather than value-added analysis. This is the primary source of human error and costly compliance deviations.
In this context, automation is no longer an optional upgrade; it is a structural necessity. By deploying modular robotics and automated genomic sequencing workflows, companies are delivering step-change improvements in productivity and speed.
These systems are increasingly underwritten as long-lifecycle infrastructure with high switching costs and deeply embedded, recurring revenue. They are not merely machines; they are the compliant, high-uptime manufacturing infrastructure that the entire life sciences sector relies on to function.
Finally, we are seeing a reanchoring of the healthcare system away from the hospital as the default centre of gravity.
Driven by constrained capacity and the maturation of remote monitoring and AI-enabled triage, high-acuity care is migrating down the acuity curve.
This shift is durable because outcomes and economics are finally aligned; hospital-at-home models are associated with lower readmissions and improved patient satisfaction.
For MedTech, the implication is that value increasingly accrues to companies that enable care beyond the four walls of the acute setting.
This is not about replacing hospitals, but expanding the infrastructure of care through monitoring networks, connected devices, and analytics layers.
The highest value is being created not by the device that goes into the home, but by the physical, financial, and digital plumbing that makes decentralised care operationally viable in the first place.
As we look to the next decade, the single thread that ties these strategies together is that the landscape no longer rewards companies that simply sell better products – it rewards those who build indispensable infrastructure.
These assets become embedded in daily operations, create deep competitive moats, and ultimately command the strategic valuations that define market leadership.
The infrastructure mindset is no longer just a strategic advantage; it is the primary driver of value creation in our industry.
