FTC’s First Merger Challenge Under New Leadership Signals Return to Traditional Antitrust Theories in Private Equity Deals

On March 6, 2025, the Federal Trade Commission (FTC) filed a lawsuit in federal court challenging GTCR BC Holdings, LLC's (GTCR) proposed acquisition of Surmodics, Inc. (Surmodics). The complaint alleges that the transaction would violate antitrust laws by combining the #1 and #2 players in the provision of outsourced hydrophilic coatings for medical devices.

The FTC’s challenge, the first under the new Republican-led FTC, relies on a traditional theory of harm and is remarkable in its silence about private equity roll-up and add-on practices. While the two Democratic Commissioners issued a concurring statement asserting the transaction is an example of a “problematic playbook… [of] a private equity” company, the complaint and the FTC press release are devoid of any such reference. This omission suggests that the anti-private equity perspective is now a minority view within the FTC, and that the Republican-led FTC will apply conventional competitive harm analysis based on established antitrust principles.

GTCR, a private equity firm, acquired a majority stake in Biocoat, Inc. (Biocoat), an outsourced hydrophilic coatings provider, in 2022. Surmodics, the target of GTCR’s proposed acquisition, is the alleged market leader of outsourced hydrophilic coatings. According to FTC’s complaint, outsourced hydrophilic coatings providers supply essential coatings that reduce friction in the use of medical devices such as catheters and guidewires. These coatings, applied either through UV curing (using light, as Surmodics does) or thermal curing (using heat, as Biocoat does), are important for the safety and effectiveness of interventional medical devices. Although UV and thermal curing differ in their methods—a fact that might suggest that the transaction has procompetitive effects in bringing together the parties’ complementary technologies—the FTC alleges that both are generally effective for the vast majority of medical devices such that they are interchangeable and constitute a single product market. The FTC complaint also alleges that in-house capabilities of OEM customers would not competitively discipline the outsourced providers due to technical complexities, stringent regulatory requirements, and extensive testing.

In this narrowly-defined market, the FTC’s complaint alleges that the transaction would consolidate the top players in the outsourced hydrophilic coatings market, creating a single player with over 50% market share and significantly reshaping competitive dynamics in a concentrated market marked by high entry barriers and strict regulatory standards. The FTC’s complaint also outlines how the Herfindahl-Hirschman Index (HHI), a metric used to measure market concentration, yields results that substantially surpass the threshold for presumptive illegality.

Surmodics released a statement noting it “respectfully disagrees with the FTC's decision and remains committed to completing the merger. Surmodics remains confident in both its rationale for the merger and the value it will bring to all stakeholders, including shareholders, customers, and patients. We have worked constructively with the FTC over the last several months to secure regulatory approval for the merger and are disappointed by its decision to initiate litigation, as the merger is pro-competitive.”

Notably, in the FTC’s first challenge under the new administration, its analytical approach emphasizes traditional antitrust theories, focusing on the horizontal combination of two direct head-to-head competitors with high combined market shares in an allegedly concentrated market, rather than the fact that the deal involves a private equity add-on.

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