• Login
    • Join
  • FOLLOW:
  • Subscribe Free
    • Magazine
    • eNewsletter
    Checkout
    • Magazine
    • News
    • Opinions
    • Top 30
    • Research
    • Supply Chain
    • Device Sectors
    • Directory
    • Events
    • Resources
    • Microsites
    • More
  • Magazine
  • News
  • Opinions
  • Top 30
  • Research
  • Supply Chain
  • Device Sectors
  • Directory
  • Events
  • Resources
  • Microsites
  • Current / Back Issues
    Features
    Editorial
    Digital Edition
    eNewsletter Archive
    Our Team
    Editorial Guidelines
    Reprints
    Subscribe Now
    Advertise Now
    Top Features
    Voices for Medtech: AdvaMed and MDMA Leaders Share Thoughts

    Digitize Your QMS via an Enterprise Cloud Platform

    Diagnostic Desperation: A Look at IVD Trends During COVID-19

    Resourceful Resources: Materials Make a Difference During the Pandemic

    Stressed Testing: Challenges with Medical Device Testing
    OEM News
    Supplier News
    Service / Press Releases
    Online Exclusives
    Press Releases
    People in the News
    Product & Service Releases
    Supplier News
    Medtech Makers
    Technical Features
    International News
    Videos
    Product & Service Releases
    Live From Shows
    Top News
    FDA OKs First OTC Home Molecular COVID-19 Test

    FDA Approves Second Sight's Argus 2s Retinal Prosthesis

    Cross Border Venture Financing Rose in Final Quarter of 2020

    Aetna Executive Joins Inogen's Board of Directors

    Guided Therapeutics Raises $1.1 Million in New Preferred Stock Offering
    From the Editor
    Blogs
    Guest Opinions
    Top Opinions
    Voices for Medtech: AdvaMed and MDMA Leaders Share Thoughts

    Digitize Your QMS via an Enterprise Cloud Platform

    Diagnostic Desperation: A Look at IVD Trends During COVID-19

    Resourceful Resources: Materials Make a Difference During the Pandemic

    Stressed Testing: Challenges with Medical Device Testing
    Top 30 Medical Device Companies
    Market Data
    White Papers
    Top Research
    Cybersecurity Compromises, Courtesy of COVID-19

    A Look at the Actual Device Costs for Hospitals

    Show Time: Here’s What a Year of No Tradeshows Meant for Small Businesses

    FDA Making Progress With Technology and Data Action Plans

    What’s Hot Now in Medtech M&A
    3D/Additive Manufacturing
    Contract Manufacturing
    Electronics
    Machining & Laser Processing
    Materials
    Molding
    Packaging & Sterilization
    R&D & Design
    Software & IT
    Testing
    Tubing & Extrusion
    Cardiovascular
    Diagnostics
    Digital Health
    Neurological
    Patient Monitoring
    Surgical
    Orthopedics
    All Companies
    Categories
    Company Capabilities
    Add New Company
    Outsourcing Directory
    FUTEK Advanced Sensor Technology Inc.

    Qosina Corp.

    Concise Engineering

    Medicoil

    PTI Engineered Plastics Inc.
    MPO Summit
    Industry Events
    Webinars
    Live From Show Event
    Industry Associations
    Videos
    Career Central
    eBook
    Slideshows
    Top Resources
    How Grant Funding Works and How It Can Help

    Refurbished Medical Equipment Testing and Certification Under the NEC

    Taking the First Step with Metal Components

    4 Trends Driving Medical Manufacturing in 2021

    Pioneering AI Solutions to Reinforce Healthcare Services
    Companies
    News Releases
    Product Releases
    Press Releases
    Product Spec Sheets
    Service Releases
    Case Studies
    White Papers
    Brochures
    Videos
    Outsourcing Directory
    Unicep

    Medicoil

    Medbio LLC

    Spectrum Plastics Group

    MW Life Sciences
    • Magazine
      • Current/Back Issues
      • Features
      • Editorial
      • Columns
      • Digital Editions
      • Subscribe Now
      • Advertise Now
    • News
    • Directory
      • All Companies
      • ALL CATEGORIES
      • Industry Associations
      • Company Capabilities
      • Add Your Company
    • Supply Chain
      • 3D/Additive Manufacturing
      • Contract Manufacturing
      • Electronics
      • Machining & Laser Processing
      • Materials
      • Molding
      • Packaging & Sterilization
      • R&D & Design
      • Software & IT
      • Testing
      • Tubing & Extrusion
    • Device Sectors
      • Cardiovascular
      • Diagnostics
      • Digital Health
      • Neurological
      • Patient Monitoring
      • Surgical
      • Orthopedics
    • Top 30 Company Report
    • Expert Insights
    • Slideshows
    • Videos
    • Podcasts
    • Resources
    • eBook
    • Infographics
    • Whitepapers
    • Research
      • White Papers
      • Case Studies
      • Product Spec Sheets
      • Market Data
    • MPO Summit
    • Events
      • Industry Events
      • Live From Show Events
      • Webinars
    • Microsite
      • Companies
      • Product Releases
      • Product Spec Sheets
      • Services
      • White Papers / Tech Papers
      • Press Releases
      • Videos
      • Literature / Brochures
      • Case Studies
    • About Us
      • About Us
      • Contact Us
      • Advertise with Us
      • eNewsletter Archive
      • Privacy Policy
      • Terms of Use
    Columns

    The Benefits of Private Equity Partnerships

    ...

    The Benefits of Private Equity Partnerships
    Related CONTENT
    • Propel
    • Patent Law: How OEMs and CMs Can Work Together
    • Insulet Appoints Venture Fund Executive to its Board of Directors
    • Investment Firm Executive With Past White House Ties Joins BrainScope Board of Directors
    • Orchestra BioMed Appoints Chief Financial Officer
    Stephanie S. McCann, Partner, McDermott Will & Emery03.07.19
    For an entrepreneurial life sciences company, partnership with an investment firm can be a smart option for business expansion and growth. While venture capital funds offer an attractive capital boost for startups, partnering with a private equity (PE) firm can provide the additional strategic support and business collaboration necessary to take a life sciences business to the next level.

    Like a venture capital investment, PE funding gives companies needed capital to launch or expand strategic initiatives such as sales and marketing or research and development (R&D) efforts. Just as importantly, collaboration with a reputable PE firm gives firms access to years of industry experience and market insights—vital assets for growth in today’s competitive deals environment.

    For example, a burgeoning medical device company might be considering making acquisitions to expand its portfolio. A PE firm can help build out the company’s management team, solidify its core business, identify strategic assets for acquisition, coordinate due diligence, and negotiate the purchase documents. Few early-stage life sciences companies have the capital reserves or the right staffing to successfully tackle those tasks on their own.

    Rules of Attraction
    The current market is efficient, and life sciences valuations are generally high. More than valuations, however, PE firms are focused on a life sciences company’s prospects for continued growth. The most attractive targets for PE investment are companies that can support their business model regardless of market conditions. While some commentators are warning that the market is reaching the top of the bubble, PE financing will continue to be available for the right products and the right business models.

    The healthcare and life sciences industry is one of the most active PE markets; as such, health and life sciences products generally are attractive for investment. PE investors are often particularly interested in products that are well reimbursed or have a consistent history of reimbursement. Similarly, products that have a stable or growing population base—and are therefore less likely to be affected by economic or regulatory change—also are good targets for PE investment.

    Hot investment areas for PE investors today include tools for the lab products sector, diagnostic products and pharmaceutical outsourced services (i.e., CRO, CMO, and medical affairs). Healthcare information technology is likely to remain a highly active sector for PE investors in 2019 as adoption of digital health solutions, platforms, and therapeutics continues apace. In particular, life sciences companies that leverage machine learning and artificial intelligence in their products and services are taking a prominent spot in many PE investors’ portfolios. Such technologies enable companies to develop innovative products and services in areas like wellness that have long been investment priorities for corporations and payers alike.

    Deal Execution Factors to Consider 
    Deal Structure
    In general, the preferred purchase price structure for a life sciences PE transaction is one under which the life sciences company owners retain equity and are incentivized alongside the PE firm to grow the value of the business. Earn-out structures are generally less appealing because they can potentially cause conflict down the road—for example, in determining earn-out metrics, the way in which an earn-out will be paid, and whether the earn-out will be invested into sales and marketing or R&D. As an alternative to earn-outs, a deal could include creative solutions such as profit interests or preferred securities to maintain downside protection for the investor along with adequate upside incentive for the founders and management, while mitigating dilution to the life sciences company owners.

    Use of Insurance in Transactions
    Representations and warranties insurance (RWI) plays a significant role in PE transactions, offering myriad advantages on both the buy and sell side. RWI is an excellent way for a life sciences company to differentiate itself at auction, because it allows a seller to monetize close to 100 percent of the deal proceeds immediately and avoid lengthy escrows. For large-scale deals, in fact, RWI is essentially a prerequisite.

    An underutilized but equally important form of insurance is patent insurance. Intellectual property (IP) litigation in the life sciences arena is frequent and severe—life sciences is one of the top three most targeted areas for IP litigation. Patent infringement claims occur two times more frequently than directors and officers liability (D&O) claims, yet D&O insurance is far more common in the life sciences field than insurance for patents.

    Unlike RWI, which can be handled in the course of a deal, advance planning is required for IP insurance. Companies should obtain patent insurance well before seeking an exit, since once there is active infringement, it is too late to buy coverage. The good news is that having IP insurance in place often means earlier access to funding and better terms—and when it comes time for the transaction, quicker, better exits, because having patent insurance means that a third-party insurer has already conducted substantial due diligence of the asset.

    While patent insurance is of course an extra expense, for emerging and small life sciences companies, it is usually worth it. For a controversy between $10 million and $25 million, for example, the average cost of a trial is $3.5 million, according to the American Intellectual Property Law Association. The bigger the amount at stake, the higher the trial costs. IP insurance coverage can be customized to a company’s needs, and can include patent trolls, enforcement actions, and unintentional infringement.

    Escrow Agency Services
    While RWI is frequently used in PE transactions and shifts the indemnification risk from the seller to the insurer, RWI may not completely eliminate the need for an escrow arrangement.  In these instances, the amount of escrowed funds may be reduced, but escrow services will usually be a prerequisite to closing. Selecting an escrow agency with robust experience in the life sciences space will ensure the transaction is not held up unnecessarily.

    Conclusion
    The benefits of partnership with a PE investor extend beyond the capital infusion. PE investors with broad deal experience can offer the management support, business know-how, and deep industry relationships to help an early-stage life sciences company achieve scale and take its place in the industry as a robust and savvy market player. In this moment of rapid market transformation and disruption, a carefully planned and well-structured PE investment can help a company maximize its potential and seize the opportunity to thrive. 


    Stephanie S. McCann is a partner at McDermott Will & Emery. McCann focuses her practice on corporate finance. She represents private equity groups, commercial lending institutions, and major public and private companies in connection with the structuring, negotiation, and documentation of secured and unsecured financing transactions, including senior, mezzanine and subordinated debt transactions, acquisition financings, loan workouts and restructurings. McCann is a current member of McDermott’s Executive and Management committees.
    Related Searches
    • digital health
    • protection
    • technology
    • technologies
    Suggested For You
    Propel Propel
    Patent Law: How OEMs and CMs Can Work Together Patent Law: How OEMs and CMs Can Work Together
    Insulet Appoints Venture Fund Executive to its Board of Directors Insulet Appoints Venture Fund Executive to its Board of Directors
    Investment Firm Executive With Past White House Ties Joins BrainScope Board of Directors Investment Firm Executive With Past White House Ties Joins BrainScope Board of Directors
    Orchestra BioMed Appoints Chief Financial Officer Orchestra BioMed Appoints Chief Financial Officer
    Accu-Tube Launches Rebranding and Improvements Accu-Tube Launches Rebranding and Improvements
    DYSIS Medical Appoints New CEO and Chief Commercial Officer DYSIS Medical Appoints New CEO and Chief Commercial Officer
    Medidata Adds to its Board of Directors Medidata Adds to its Board of Directors
     TransEnterix Receives FDA 510(k) Clearance for 3mm Diameter Instruments TransEnterix Receives FDA 510(k) Clearance for 3mm Diameter Instruments
    Alpha Source Group Names President Alpha Source Group Names President
    Philips Launches First Startup Collaboration Program for AI in Healthcare Philips Launches First Startup Collaboration Program for AI in Healthcare
    Making Sense of Medtech M&A and Trade Wars Making Sense of Medtech M&A and Trade Wars
    Merit Medical Buys Cianna Medical for Up to $200M Merit Medical Buys Cianna Medical for Up to $200M
    Lantheus Holdings Appoints Chief Financial Officer and Treasurer Lantheus Holdings Appoints Chief Financial Officer and Treasurer

    Related Columns

    • Software & IT
      Cybersecurity Compromises, Courtesy of COVID-19

      Cybersecurity Compromises, Courtesy of COVID-19

      As the healthcare industry focused its energies last year on battling SARS-CoV-2, cybercriminals used the distraction to their advantage.
      Michael Barbella, Managing Editor 03.04.21

    • A Look at the Actual Device Costs for Hospitals

      A Look at the Actual Device Costs for Hospitals

      According to a 2018 clinical journal article, U.S. hospitals spent approximately $200 billion on medical devices.
      Maria Shepherd, President and Founder, Medi-Vantage 03.04.21

    • Show Time: Here’s What a Year of No Tradeshows Meant for Small Businesses

      Show Time: Here’s What a Year of No Tradeshows Meant for Small Businesses

      For small businesses, trade shows are a critical part of developing new business as well as maintaining contacts.
      Dawn A. Lissy, Founder & President, Empirical 03.04.21


    • FDA Making Progress With Technology and Data Action Plans

      FDA Making Progress With Technology and Data Action Plans

      There is an urgent need to get advanced technologies into the healthcare ecosystem, but all products must first get regulatory approval.
      Alan Rencher, Vice President, Engineering, MasterControl 03.04.21

    • What’s Hot Now in Medtech M&A

      What’s Hot Now in Medtech M&A

      Every M&A cycle in the life sciences/medtech sector fosters exciting deals that interestingly impact the industry in both the short and long term.
      Florence Joffroy-Black and Dave Sheppard, MedWorld Advisors 03.04.21

    • Software & IT
      Three Ways to Fast-Track the Total Product Lifecycle

      Three Ways to Fast-Track the Total Product Lifecycle

      Here are three ways leaders including Alcon, Baxter Healthcare, Boston Scientific, Epredia, and Illumina are driving innovation in medtech.
      Seth Goldenberg, Ph.D., Vice President, MedTech, Veeva Systems 03.04.21


    • Materials
      Role and Benefits of Plastics in the COVID-19 Vaccine Rollout

      Role and Benefits of Plastics in the COVID-19 Vaccine Rollout

      With some estimating the U.S. needs at least 850 million syringes for every person to receive the vaccine—plastics will play a significant role.
      Josh Blackmore, Global Healthcare Manager, M. Holland Company 03.03.21

    • R&D & Design
      Six Questions to Consider in Developing a Home Healthcare Device

      Six Questions to Consider in Developing a Home Healthcare Device

      These design decisions stem from questions relative to in-home use and 60601-1-11 compliance.
      Rachael Scott, Lead Electrical Engineer, Key Tech 03.03.21

    • Digital Health
      Five Themes to Watch as Digital Health Takes Center Stage

      Five Themes to Watch as Digital Health Takes Center Stage

      Here are five themes to watch in the sector, including what life sciences developers and investors should know about the current deal-making landscape.
      Stephen W. Bernstein, Partner, McDermott Will & Emery 03.03.21


    • Surgical
      Rethink Your Medtech ASC Strategy, Part 1

      Rethink Your Medtech ASC Strategy, Part 1

      ASCs have adopted a strategy to focus on predictable, low-risk procedures with lower complication rates in an out-of-hospital setting.
      Maria Shepherd, President and Founder, Medi-Vantage 02.03.21

    • R&D & Design
      Pandemic-Level Playing Field: How COVID-19 Made Space for Progress

      Pandemic-Level Playing Field: How COVID-19 Made Space for Progress

      Pandemic restrictions may have diminished certain advantages large companies hold over small and mid-sized competitors.
      Dawn A. Lissy, President & Founder, Empirical 02.03.21

    • Tips for Reigniting Your MDR/IVDR Preparation

      Tips for Reigniting Your MDR/IVDR Preparation

      To get the MDR/IVDR preparation ball rolling again, here are four processes to help refocus on achieving compliance with the updated regulations.
      Nicolle Cannon, Founder and CEO, Cannon Quality Group LLC 02.03.21


    • Materials
      Three Major Innovation Opportunities for Biomedical Textiles

      Three Major Innovation Opportunities for Biomedical Textiles

      Biomedical textiles are gaining significant momentum for use in medical devices to facilitate less invasive surgical procedures.
      John Greco, Vice President of Sales, Cortland Biomedical 02.03.21

    • Contract Manufacturing
      Use Vertical Integration to Increase Productivity, Drive Innovation

      Use Vertical Integration to Increase Productivity, Drive Innovation

      The concept of vertical integration is simple: a company combining two or more stages of production that would normally be operated by separate companies.
      Ryan Lipe, Senior Vice President of Sales & Marketing, MGS 02.03.21

    • How to Better Prepare for Regulatory Requests and Minimize Impact

      How to Better Prepare for Regulatory Requests and Minimize Impact

      Pressure to increase efficiency in medical device development has been prevalent over the past year, especially with the intensified regulatory expectations.
      Sandi Schaible, Sherry Parker and Kim Ehman, WuXi AppTec Medical Device Testing 02.03.21


    Trending
    • The Benefits Of Blockchain
    • 5 Ways Plastics Revolutionized The Healthcare Industry
    • Top 10 Trends In The Medical Device And Equipment Industry
    • Plastikos Medical Begins Phase II Of Expansion
    • Cheetah Medical Introduces Noninvasive Monitoring System
    Breaking News
    • FDA OKs First OTC Home Molecular COVID-19 Test
    • FDA Approves Second Sight's Argus 2s Retinal Prosthesis
    • Cross Border Venture Financing Rose in Final Quarter of 2020
    • Aetna Executive Joins Inogen's Board of Directors
    • Guided Therapeutics Raises $1.1 Million in New Preferred Stock Offering
    View Breaking News >
    CURRENT ISSUE

    March 2021

    • Stressed Testing: Challenges with Medical Device Testing
    • Resourceful Resources: Materials Make a Difference During the Pandemic
    • Diagnostic Desperation: A Look at IVD Trends During COVID-19
    • Digitize Your QMS via an Enterprise Cloud Platform
    • Voices for Medtech: AdvaMed and MDMA Leaders Share Thoughts
    • View More >

    Cookies help us to provide you with an excellent service. By using our website, you declare yourself in agreement with our use of cookies.
    You can obtain detailed information about the use of cookies on our website by clicking on "More information”.

    • About Us
    • Privacy Policy
    • Terms And Conditions
    • Contact Us

    follow us

    Subscribe
    Nutraceuticals World

    Latest Breaking News From Nutraceuticals World

    Diets High In Fructose Could Cause Immune System Damage
    Nestlé Acquires Premium Water Brand Essentia
    Kaneka Probiotics Announces Launch of L. plantarum DR7
    Coatings World

    Latest Breaking News From Coatings World

    Sherwin-Williams Announces Resignation of President, COO
    Ashland Completes Expansion, Relocation of Viatel Bioresorbable Polymers Manufacturing Facility
    Evonik Receives Sustainability Award from EcoVadis
    Medical Product Outsourcing

    Latest Breaking News From Medical Product Outsourcing

    FDA OKs First OTC Home Molecular COVID-19 Test
    FDA Approves Second Sight's Argus 2s Retinal Prosthesis
    Cross Border Venture Financing Rose in Final Quarter of 2020
    Contract Pharma

    Latest Breaking News From Contract Pharma

    Sharp Appoints EU Qualified Person
    Baxter Biopharma Solutions Enters Sterile Manufacturing Agreement for Novavax’ COVID-19 Vaccine
    Metrics Contract Services Completes Russian Regulatory Inspection
    Beauty Packaging

    Latest Breaking News From Beauty Packaging

    It's International Women's Day—But What Does That Mean?
    e.l.f. Cosmetics and Chipotle Collaborate on Burrito-Inspired Makeup Collection
    Weekly Recap: Sephora Expansion, Ulta Partners with Loop, International Women’s Day & More
    Happi

    Latest Breaking News From Happi

    Cococare Appoints First Woman President
    Ross Highlights Triple Shaft Mixers
    Arm & Hammer Unveils Foot Wipes
    Ink World

    Latest Breaking News From Ink World

    Capital Printing Invests in 2nd Komori Press
    Arna Marketing Adds Canon’s ProStream, VarioPRINT iX Production Inkjet Presses
    Massilly North America Adds Koenig & Bauer MetalStar 3 Metal Decorating Press
    Label & Narrow Web

    Latest Breaking News From Label & Narrow Web

    Xeikon details upcoming Xeikon Café TV seminars
    Resource Label Group acquires New England Label
    UV+EB-cured products rated 'easier to recycle'
    Nonwovens Industry

    Latest Breaking News From Nonwovens Industry

    Arm & Hammer Launches Foot Wipes
    Kimberly-Clark Names Chief Research and Development Officer
    FPInnovations Develops Biodegradable Mask
    Orthopedic Design & Technology

    Latest Breaking News From Orthopedic Design & Technology

    Australia Clears Conformis' iTotal PS Knee Replacement System
    Colfax Decides to Divide Its Businesses
    Stryker Corp.'s 2020 Sales Slip 3.6 Percent
    Printed Electronics Now

    Latest Breaking News From Printed Electronics Now

    Comercial Kywi Improves Customer Service, Front-Store Operations with Zebra Mobile Solution
    Global Smart Glass Market to Register 6.8% CAGR Between 2021-28: Grand View Research
    Wearable Patch Market to Reach $27.8 Billion by 2027: Allied Market Research

    Copyright © 2021 Rodman Media. All rights reserved. Use of this constitutes acceptance of our privacy policy The material on this site may not be reproduced, distributed, transmitted, or otherwise used, except with the prior written permission of Rodman Media.

    AD BLOCKER DETECTED

    Our website is made possible by displaying online advertisements to our visitors.
    Please consider supporting us by disabling your ad blocker.


    FREE SUBSCRIPTION Already a subscriber? Login