Kevin Ehlert, Trelleborg Sealing Solutions05.30.23
Outsourcing by medical device contract manufacturers continues to be a strong industry trend. The outsourcing market is growing faster than the device market overall.
According to a report by Grand View Research the global medical device outsourcing market was valued at 117.5 billion USD in 2022 and is expected to expand at a compound annual growth rate of 12.1% from 2023 to 2030. Increasing demand for wearable medical devices and the requirement to reduce the cost is expected to drive the market during this period.
This outsourcing trend lends itself to another: mergers and acquisitions. Medical device original equipment manufacturers (OEMs) are looking to have fewer suppliers providing a broader range of services, as well as provide world-class expertise. Meanwhile, global component suppliers are looking to broaden their portfolios and depth of service offerings. Together these trends are leading to market consolidation through more mergers and acquisitions (M&A) amongst component suppliers.
The thought of merging, selling, or being acquired by a larger company can be daunting for companies that have been independently owned and operated for many years. Founders, entrepreneurs, and owners pour their passion, energy, and capital into their companies. While selling could mean a safety net into retirement as well as access to capital for growth, there are broader points to keep in mind for owners looking to sell.
Linda Muroski, Business Unit President, Global Healthcare & Medical, says: “I’ve talked with many business owners whose primary concern is making sure that the new owner will take care of what they have built. They want to ensure that values are aligned between the two companies and that the successful business they’ve built won’t fade away into a larger entity.”
The following are considerations for owners who might be looking to sell their company as a way forward for their businesses.
Becoming part of a large global company mean there is the potential that employees will see positive changes to their benefits program. This could mean reduced out of pocket costs for healthcare, 401K matching, and increased insurance offerings. According to an article by the CEO and Founder of DealRoom, mergers often mean better overall compensation for employees, including benefits.
2. Career Opportunities
M&A activity often leads to broader career opportunities for employees of the acquired company. Chris Tellers, Trelleborg’s Director of Rapid Development for Healthcare & Medical, knows this firsthand.
He says: “I joined Trelleborg as the result of an acquisition and they have provided great career opportunities for me. Along with additional training, I work with diverse teams all over the world. Trelleborg has been able to bring multiple acquisitions together, and it feels like a unified team all working towards one common goal.”
Companies that acquire other businesses usually want to quickly reinvest in the facility and its capabilities. For example, after Trelleborg acquired EirMed in 2022, it approved capital for new presses for a customer expansion project. And an M&A deal usually allows the acquired company to make healthier business decisions and move away from operating on lean resources.
4. Best of Both Approach
Large global component suppliers are looking to acquire businesses that already show potential.
Kevin Ehlert, Director of Mergers & Acquisitions at Trelleborg Sealing Solutions says: “A responsible buyer looks at the great things that are already happening at a business and builds on them. They don’t necessarily want to come in and change everything. For instance, we acquired a company that had a great business model for offering its customer subassemblies and kitting. We chose to build on their existing concept and brand it as a company-wide capability. Trelleborg is also taking this same best of both approach as we integrate the services and capabilities from our most recent acquisition - Minnesota Rubber & Plastics.”
Family founders and owners may be wary of being pushed out during an acquisition, but buyers should want to work with the existing owner. A company looking to acquire a traditionally run “mom and pop” business should encourage the owners to stay on for their expertise.
“Trelleborg purchased a tool maker in Europe and the owner didn’t have anyone to continue his business,” notes Ehlert. “After the deal was complete, he stayed on to train people through an apprentice program before he retired so he could rest assured the business was in good hands.”
6. Increased Credibility
When a smaller operation is acquired by a larger company, it can benefit from the credibility and reputation of the acquiring company. Large global companies often have established brands and reputations and being associated with them can boost credibility. This kind of visibility in a crowded marketplace helps attract top talent and position the acquired company as an innovative player in the industry.
Kevin Ehlert is Director of Mergers & Acquisition, Healthcare & Medical, at Trelleborg Sealing Solutions.
According to a report by Grand View Research the global medical device outsourcing market was valued at 117.5 billion USD in 2022 and is expected to expand at a compound annual growth rate of 12.1% from 2023 to 2030. Increasing demand for wearable medical devices and the requirement to reduce the cost is expected to drive the market during this period.
This outsourcing trend lends itself to another: mergers and acquisitions. Medical device original equipment manufacturers (OEMs) are looking to have fewer suppliers providing a broader range of services, as well as provide world-class expertise. Meanwhile, global component suppliers are looking to broaden their portfolios and depth of service offerings. Together these trends are leading to market consolidation through more mergers and acquisitions (M&A) amongst component suppliers.
The thought of merging, selling, or being acquired by a larger company can be daunting for companies that have been independently owned and operated for many years. Founders, entrepreneurs, and owners pour their passion, energy, and capital into their companies. While selling could mean a safety net into retirement as well as access to capital for growth, there are broader points to keep in mind for owners looking to sell.
Linda Muroski, Business Unit President, Global Healthcare & Medical, says: “I’ve talked with many business owners whose primary concern is making sure that the new owner will take care of what they have built. They want to ensure that values are aligned between the two companies and that the successful business they’ve built won’t fade away into a larger entity.”
The following are considerations for owners who might be looking to sell their company as a way forward for their businesses.
What Does the Sale Mean for Employees?
1. Employee BenefitsBecoming part of a large global company mean there is the potential that employees will see positive changes to their benefits program. This could mean reduced out of pocket costs for healthcare, 401K matching, and increased insurance offerings. According to an article by the CEO and Founder of DealRoom, mergers often mean better overall compensation for employees, including benefits.
2. Career Opportunities
M&A activity often leads to broader career opportunities for employees of the acquired company. Chris Tellers, Trelleborg’s Director of Rapid Development for Healthcare & Medical, knows this firsthand.
He says: “I joined Trelleborg as the result of an acquisition and they have provided great career opportunities for me. Along with additional training, I work with diverse teams all over the world. Trelleborg has been able to bring multiple acquisitions together, and it feels like a unified team all working towards one common goal.”
How Will the Deal Impact Future Growth?
3. Capital investmentsCompanies that acquire other businesses usually want to quickly reinvest in the facility and its capabilities. For example, after Trelleborg acquired EirMed in 2022, it approved capital for new presses for a customer expansion project. And an M&A deal usually allows the acquired company to make healthier business decisions and move away from operating on lean resources.
4. Best of Both Approach
Large global component suppliers are looking to acquire businesses that already show potential.
Kevin Ehlert, Director of Mergers & Acquisitions at Trelleborg Sealing Solutions says: “A responsible buyer looks at the great things that are already happening at a business and builds on them. They don’t necessarily want to come in and change everything. For instance, we acquired a company that had a great business model for offering its customer subassemblies and kitting. We chose to build on their existing concept and brand it as a company-wide capability. Trelleborg is also taking this same best of both approach as we integrate the services and capabilities from our most recent acquisition - Minnesota Rubber & Plastics.”
What Does It Mean for Owners?
5. An Invitation to StayFamily founders and owners may be wary of being pushed out during an acquisition, but buyers should want to work with the existing owner. A company looking to acquire a traditionally run “mom and pop” business should encourage the owners to stay on for their expertise.
“Trelleborg purchased a tool maker in Europe and the owner didn’t have anyone to continue his business,” notes Ehlert. “After the deal was complete, he stayed on to train people through an apprentice program before he retired so he could rest assured the business was in good hands.”
6. Increased Credibility
When a smaller operation is acquired by a larger company, it can benefit from the credibility and reputation of the acquiring company. Large global companies often have established brands and reputations and being associated with them can boost credibility. This kind of visibility in a crowded marketplace helps attract top talent and position the acquired company as an innovative player in the industry.
Conclusion
The changing demand for outsourcing from OEMs is spurring mergers and acquisitions on the component manufacturer side. Many suppliers are focused on acquiring companies that can help round out their capabilities and geographical reach. This can be positive for smaller operations that have previously been independently owned. Being acquired by a global company can mean greater employee benefits, career opportunities, capital investments, collaboration, and longevity for smaller component suppliers.Kevin Ehlert is Director of Mergers & Acquisition, Healthcare & Medical, at Trelleborg Sealing Solutions.
