Strategy for U.S. acquisitions are innately different than those for global acquisitions. Medtech firms should ask these five questions when doing overseas acquisitions, writes Jim Prutow of PricewaterhouseCoopers.
As we found in our 17th Annual Global CEO survey, CEOs everywhere are facing unprecedented challenges, including more diverse and demanding customer segments across multiple markets and, increasingly, intense competition in a global world.
Medical device companies can no longer expect the same level of success by focusing solely on U.S. acquisitions given that growth opportunities lie more and more elsewhere, especially in emerging markets. Leaders in the medical device sector recognize that to stay competitive, they must have a strong Outside the U.S. (OUS) strategy to build out the global capabilities necessary for success in today’s New Health Economy.
|Jim Prutow, Principal, PwC Pharmaceutical and Life Sciences Sector|
The shift toward global acquisitions can be seen in the recent M&A activity in this sector. PwC data shows that in the last 12 months there have been eight deals worth $7 billion in this sector, with five deals pending worth an additional $44.6 billion. OUS growth is an important element in each of the transactions.
Global acquisitions allow medical device firms the ability to more quickly offer products that are designed for the new market, which might have different clinical needs from the U.S. For instance, more robust products that can withstand a wider operating temperature range.
In addition, such transactions provide the parent company with an established local commercial infrastructure enabling them to quickly start increasing sales in a given geography.
While the benefits are numerous, it is important to recognize that acquisition strategies for global and emerging markets differ from U.S. acquisition strategies in some fundamental ways.
Within the U.S., medical device firms focus on three key areas as they evaluate acquisition targets:
However, for OUS acquisitions, less emphasis is placed on a company’s current revenue and more focus is directed toward the long-term growth opportunities. In that context, these are five questions that medtech firms evaluating emerging market acquisition candidates need to ask.
As we found in our Annual Global CEO survey, the search for growth in the medtech sector is getting more complicated as opportunities in both developed and emerging economies become more nuanced.
While CEOs’ confidence in the global economy is strong, a robust OUS strategy is key to ensuring that this growth will translate into better prospects for their own companies.
[Image Credit: iStockphoto.com user Mikey_Man and PwC]
-- By Jim Prutow, Principal, PwC Pharmaceutical and Life Sciences Sector