Buyer and Seller Tips on Mergers & Acquisitions for MPO Companies

Whether selling or buying, for medical device manufacturing companies, acquiring an existing service or innovative new product line is preferred to reinventing the wheel, which is why this growth strategy has so much appeal. According to a report by Big Four accounting firm PwC, M&A activity in the medical device sector totaled $76.4 billion in 2021. This created a sense of optimism for 2022 and beyond.
 
The key to a successful M&A will require both sides to show up and show off. Acquirers need to show up with a strong balance sheet to prove they can make the investment and buyers need to show off their impressive assets, operational infrastructure, and finances. For the M&A process to be successfully achieved, it will take a mix of art and science, combined with good judgment and a systematic and cohesive analysis of the data.
 
MPOs, by design, have a multi-plex sensibility that can give them an advantage in the M&A process over other industries. Already skilled in the step-by-step approach of conceiving new medical device innovations, developing prototypes and enhancing marketing potential, MPOs enter the arena adept at taking an idea and turning it into reality.
 
But before buying a company or potentially selling yours, each side needs to be prepared for the best outcome. Here are some important considerations every MPO company should assess before entering an M&A deal:

Buyers: Know Your Identity

Assess your company in terms of what you do and how you do it currently. Don’t focus on the past or the future –identify your current status on corecompetencies, business culture and ability to share risk tolerance for a potential acquisition. Keep in mind, M&As are not merely an extension of licensing agreements. In fact, buying another company means you are becoming one across every aspect from workforce to partner relationships to vendor contracts to facility and equipment leases, and more.

Sellers: Know Your Valuation

This is usually where the most curb appeal is lost because owners don’t properly factor in the “totality” of their assets. Sales & revenue, purchase orders, equipment and facility ownership, patents, grandfathered contracts and leases as well as supplier partnerships are of vital importance but so too are digital assets. It is critical that to factor in custom apps, subscription models, email and text databases, proprietary tech, media holdings (podcasts, webinars, etc.), branding collateral, as well as social media followers. In today’s world, having followers, listeners, viewers and participants illustrates you have a ready pool of potential customers and brand ambassadors.

Buyers: Have One Internal Goal

It may seem counterintuitive but having many reasons for buying another company is a mistake. Multiple motivations can cloud decision-making. Having one overriding reason provides direction and focus on which markets to look at and which companies to consider. When possibilities are considered unlimited, mergers often spin out of control and fail. Proceeding with one singular purpose will hold more power in reaching your objectives than approaching the deal with a few.

Sellers: Have One External Audit

Selling your company for the maximum price takes preparation. Hire an outside auditor. No potential buyer is going to be impressed by P&L numbers compiled in-house regardless of how colorful the documents may be. Potential buyers want objective materials in order to feel confident about your numbers and have predictions compiled by outside experts and not overly enthusiastic department heads.  Professional third-party validation of your financial circumstances (past and present) will provide the credibility needed to move into next steps. 

Buyers: Know What You Don’t Know

Acquisitions are a collaborative effort and require a team of specialists to research, analyze and evaluate. You may have a company attorney who understands laws, regulations, and compliance relevant to your core competency, but is not knowledgeable about the industry of the company you wish to acquire. Assemble your team of valuation, legal, and taxation experts to streamline the deal while simultaneously protecting your interests.

Sellers: Know What You Don’t Have

Those who are essential in the day-to-day running of your company are not necessarily the best equipped to guide you in the selling of it. That is because the M&A process requires a particular expertise that must be carried out with precision and extreme attention to detail. Only the most experienced will even know what they are looking for or what questions to ask. Just as with the buying process, your selling team should have experience in, and a focus on, M&A.

Conclusion

Every organization needs to honestly assess their next steps in growth, business culture and ability to share risk tolerance. That is because “merging” means taking and accepting all of another and blending with your existing operations. Not only will you be joining strengths, but also weaknesses, which could include redundancies. Be ready, be prepared and be successful!

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David Braun is founder & CEO of Capstone Strategic, a leading M&A strategic consulting firm that has successfully facilitated over $1 Billion of client transactions in over 30 countries across more than 100 industries including medical product manufacturing and supply chain companies. He is also the author of the book, Successful Acquisitions: A Proven Plan for Strategic Growth. He can be reached at growth@capstonestrategic.com.