Corporate Governance Risks in Medical Device M&A: The Staar Surgical-Alcon Controversy

The proposed $28-per-share acquisition of Staar Surgical by Alcon has ignited a fierce proxy battle, exposing deepening concerns over corporate governance in medical device mergers and acquisitions. Institutional Shareholder Services (ISS) and Glass Lewis, two of the most influential proxy advisors, have advised shareholders to oppose the deal, citing flaws in valuation, timing, and process, and Broadwood announced its opposition (Broadwood's opposition). This case underscores how governance risks—particularly in high-stakes medtech transactions—can create friction between boards, shareholders, and advisors, with broader implications for the sector.

Valuation and Process: A Clash of Narratives

At the heart of the controversy is the question of whether Alcon's offer fairly compensates Staar shareholders. Broadwood Partners, Staar's largest shareholder with a 27.3% stake, argues the $28-per-share price tag is a "material undervaluation," as MassDevice reported. This stance is bolstered by the fact that Alcon initially proposed $55 per share plus a $7 contingent value right in 2024—a deal Broadwood claims was retracted just as Staar began addressing inventory management issues (MassDevice). The current offer, which implies a 4.6x forward revenue multiple (well below Staar's historical average and the 34th percentile of comparable medtech buyouts), has been criticized for failing to account for the company's recent operational improvements (Broadwood press release).

The timing of the deal has further fueled skepticism. According to MassDevice, the merger was finalized before Staar released its second-quarter financial results and ahead of clinical trial data comparing Alcon's LASIK technology to Staar's flagship Evo ICL lenses (MassDevice). This sequence of events raises questions about whether the board adequately tested the market or allowed sufficient time for Staar to demonstrate its standalone value. Broadwood and other dissenting shareholders, including Yunqi Capital and Defender Capital, now control over 34% of Staar's shares, positioning them to challenge the board's decision (Broadwood press release).

Proxy Advisors and the Governance Standard

ISS and Glass Lewis have amplified these concerns, recommending against the merger due to "inadequate sale process, valuation deficiencies, and timing issues" (Broadwood press release). Their critiques align with broader trends in corporate governance, where proxy advisors increasingly scrutinize M&A deals for procedural rigor. For instance, Glass Lewis noted that the deal's execution—before Staar's Q2 results—undermined transparency and left shareholders in the dark about the company's recent performance (Broadwood press release). This aligns with a growing emphasis on "fair process" in shareholder rights, particularly in industries where technical complexity and long-term R&D pipelines complicate valuation.

Staar's Defense: Strategic Certainty vs.

Shareholder Activism

Staar's board has defended the merger as a prudent response to macroeconomic headwinds, including declining sales in China and intensifying competition in the premium intraocular lens market, and Staar's press release emphasized a 59% premium to the 90-day average trading price while arguing the deal provides "certain cash value" in an uncertain environment. Independent proxy advisor Glass Lewis has endorsed this rationale, citing the merger's alignment with industry norms and the board's fiduciary duty to mitigate downside risks (Staar press release).

However, critics counter that the board's emphasis on "certainty" overlooks Staar's recent operational turnaround. For example, Broadwood highlighted that the company had begun resolving inventory bottlenecks and optimizing its supply chain just before Alcon retracted its higher offer—a development that could have strengthened Staar's negotiating position (MassDevice). This raises a critical governance question: Did the board prioritize short-term stability over long-term value creation?

Broader Implications for Medtech M&A

The Staar-Alcon case highlights a recurring tension in medical device M&A: the balance between board discretion and shareholder activism. While boards are legally obligated to act in the company's best interest, activist shareholders and proxy advisors increasingly challenge their decisions, particularly when valuations appear suboptimal. This dynamic is likely to intensify as medtech consolidation accelerates, driven by cost pressures and technological convergence.

For investors, the case serves as a cautionary tale about the importance of due diligence in M&A. Key red flags include abrupt changes in offer terms, opaque valuation methodologies, and rushed decision-making. Conversely, robust governance practices—such as transparent bidding processes, independent board oversight, and post-deal performance metrics—can mitigate risks and build shareholder trust.

Historical backtesting of STAAR Surgical's shareholder meetings from 2022 to 2025 reveals limited predictive power for excess returns. On average, the stock showed a mild positive cumulative return (~9%) in the best-case scenarios but lacked statistical significance against the benchmark. While roughly two-thirds of events generated positive returns in the first two weeks, this consistency waned after day 16–22, with abnormal returns fluctuating within a narrow ±10% range over 30 days (Backtest results: STAAR Surgical shareholder meeting impact analysis, 2022–2025). These findings suggest that past shareholder meetings have not reliably served as catalysts for outperformance, reinforcing the need for investors to focus on procedural transparency and long-term value drivers rather than event-driven speculation.

Conclusion

The Staar Surgical-Alcon merger has become a litmus test for corporate governance standards in medical device M&A. While the board argues the deal provides a premium and strategic clarity, ISS, Glass Lewis, and major shareholders like Broadwood contend it reflects poor process and undervaluation. As the October 2025 shareholder vote approaches, the outcome will not only determine Staar's fate but also set a precedent for how governance risks are addressed in an increasingly activist-driven market. For investors, the lesson is clear: In M&A, the devil is in the details—and those details often hinge on transparency, timing, and the integrity of the process.