How to Increase Your Company's Worth

The medtech M&A market is hot, so now's the time to consider what's enhancing and decreasing the value of your business.

September 18, 2013

3 Min Read
How to Increase Your Company's Worth

The time is right for mergers and acquisitions in medtech, says Matt Bradbury, managing director of Business Acquisition and Merger Associates, a firm that advises companies buying and selling businesses.

“Interest rates are so low, it allows buyers to pay more for a business than if interest rates were higher,” says Bradbury, who will speak about acquisition strategies at the upcoming MD&M Minneapolis conference. “Companies are flush with cash because they’ve been hoarding money for a long time, and as the market is growing and improving, they’re putting that money to work buying good companies and good products.”

To make your medtech company an attractive acquisition target and ensure you get top dollar for your business, Bradbury says it’s important to take stock of the things that can enhance your firm’s value and look closely at what might be dinging its worth.

For starters, buyers will pay more for companies that have a proprietary product. “A contract manufacturer is not going to be valued nearly as high as the guy that owns the brand,” he says.

It’s also important to ensure the company has the appropriate protections in place for any intellectual property (IP). “When the third-party due diligence team comes in, you don’t want them to find any surprises or skeletons in your closet,” Bradbury says.

IP also allows companies to command higher margins on their products, a trait that is attractive to acquirers. But companies shouldn’t overlook operational efficiency. “Some companies are innovative at developing stuff, while others are very good at manufacturing stuff,” Bradbury says. “Sometimes it makes a lot of sense to bring both of those kids of businesses together through an acquisition.”

Buyers also look for a strong brand. Bradbury suggests focusing on building an effective online presence to support proprietary products, which can be a challenge for device makers that have a lot of technical know-how but aren’t as adept at communication.

One of the biggest ways to decrease your company’s value is to put all your eggs in one basket. “If one customer has 30, 40, 50% concentration of your business, the buyer is not going to pay up for it like it would if the biggest customer was 7%,” Bradbury says.

Companies also evolve as they grow, and it’s important to make sure management has kept up. “It’s not uncommon as you’re growing as a business that your business outgrows the capability of some of your managers,” Bradbury says. He advises companies to regularly assess leadership to ensure spots are filled by high-caliber candidates.

Though interest rates are creeping up, Bradbury predicts the favorable climate for M&As will continue through the next 24 months, which gives device companies looking for an exit plenty of time to start implementing strategies to maximize their worth.

For more tips on how to make your company an attractive takeover target or how to build your business through acquisitions, attend Bradbury’s session on acquisition strategies as part of the Start-Up Accelerator master class at MD&M Minneapolis on October 28, 2013.

Jamie Hartford, managing editor, MD+DI
[email protected]

 [image courtesy of graur razvan ionut/freedigitalphotos.net]

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