The medtech mergers and acquisitions (M&A) space is hot right now. To participate, you must understand what you should and shouldn’t do. A lot of discussion focuses on sellers and what they need to do to sell their business.
However, we’ve observed that buyer behavior can also scuttle a possible win-win transaction before it gets off the ground. That’s unfortunate because it’s likely the buyer is unaware of what went wrong. For those of you considering M&A to grow your business or portfolio, we’re highlighting some key dos and don’ts based on our years of experience and observations.
Important buyer dos:
Be clear about your mandate. With emerging technology companies, many sellers have a thousand ideas and could take their IP in several different directions. Conveying your mandate clearly can help sellers focus on what’s important to you (saving everyone time).
Establish a relationship with the seller. While market opportunity, innovation, and growth drive many strategic acquisitions, it’s important to remember sellers are usually sensitive entrepreneurs who want to be valued for their capabilities as well as their companies’ value (or potential value). Develop that relationship and find ways to maximize value together.
Anticipate the integration process. This can ensure a smooth transition after closing.
Appreciate culture. Company culture can include geography, ethnicity, size, or other factors. Take time to understand it to ensure your value proposition fits the acquired company for the short- and long-term.
Focus on value creation. Make the seller feel important today and in the future.
What not to do:
Don’t behave like Goliath. Especially early in the process, acting big can make the Davids of the entrepreneurial world run the other way fast. Or in some cases, it makes them want to grow up to slay you. The Masimo - Nellcor story is a classic example of how a scorned entrepreneur (Masimo = David) left the collaboration discussions with a vengeance to destroy the established player (Nellcor = Goliath) and he eventually won!
Don’t take a laser-like focus on the numbers early. If the seller thinks you’re going to nickel and dime them during the process, they will prematurely start to worry about future dings in milestone achievements.
Don’t drag out due diligence. The longer a deal strings out, the less trust there will be. While it’s important to get the numbers right (and the deal), get your information and then be decisive about moving forward (or not).
Don’t ignore integration or cultural issues. Many great deals with obvious synergies have been destroyed because the buyer failed to recognize the importance of a successful transition plan and a positive way to handle the cultural challenges during the integration phases.
As you know, it’s a very competitive market in 2021! We wish you well in your organic and inorganic growth initiatives!