A New Era of Medtech Mergers, Acquisitions, and Strategic Alliances

By Tricia Rodewald In the medical technology space mergers and acquisitions (M&A) are as prevalent as peas and carrots. But with all the uncertainty in the industry today, will M&A continue to be as ubiquitous? And what do the leaders of companies look for when evaluating a company for potential acquisition or strategic alliance partnerships? Thanks to AdvaMed 2011’s insightful CEOs Unplugged sessions, we were able to hear knowledgeable answers to those very questions:

September 29, 2011

3 Min Read
A New Era of Medtech Mergers, Acquisitions, and Strategic Alliances

By Tricia Rodewald 

acquisition.gifIn the medical technology space mergers and acquisitions (M&A) are as prevalent as peas and carrots. But with all the uncertainty in the industry today, will M&A continue to be as ubiquitous? And what do the leaders of companies look for when evaluating a company for potential acquisition or strategic alliance partnerships?

 

Thanks to AdvaMed 2011’s insightful CEOs Unplugged sessions, we were able to hear knowledgeable answers to those very questions:

 

Cathy Burzik (president and CEO, KCI)Regarding M&A, there’s still a strong appetite for technology—whether that be from small companies, universities, etc. I think that will continue. What’s healthcare reform upon us, consolidation is going to increase. This will offer more opportunities to leverage what’s already in place like call centers, infrastructure and services centers.

 

I think they’ll be ample opportunities, but raising money for larger deals is likely to be an issue.

 

The “but” part is that CEOs across all industries are talking about all the uncertainty we face. There’s increasing concern about regulatory requirements and questions about the 510(k) process and if it’ll be replaced by the PMA (Premarket Approval) process, and if it’ll be harder to bring products to market.

 

Those are the headwinds and tailwinds, but net-net, there’s still an appetite for strategic alliances and M&A going forward into 2012.

 

Nick Valeriani (company group chairman, Ortho Clinical Diagnostics, a Johnson and Johnson Company): The fundamentals for deals in the industry are still there. I also see synergy deals out there where it makes sense for companies to consolidate across industries. Consolidating sales channels, for example, or General and Administrative overhead costs. That makes a lot of sense today. Across our path we see about 30 percent of deals as synergistic.

 

But in the reimbursement world, balancing technology with the economical and clinical proof is key to the buying decision.

 

Picking, choosing, and prioritizing opportunities must start with a strategy. The strategy will define the portfolio that you want to have, and then your portfolio of initiatives (internal and external development). That’s key.

 

M&A is opportunistic, but only to a degree. It has to be part of your strategy and in the area you want to play. So everything has to be a part of your strategy and you need to be faithful to that strategy. Otherwise, you’re wasting more time saying “no” than saying “yes.”

 

Joe Almeida (president and CEO, Covidien): Competition for deals is increasing as well. If your acquisition or strategic partnership decisions are based in a set strategy, it’s a futile process.

 

As you look at your strategy it’s important to look at new segments you can enter, or synergies with existing businesses, access to new markets, and platforms. It’s about looking for deals with partners that can be built upon.

 

Smart products by themselves are really not what it’s about anymore. The technology needs to have an approved clinical outcome and cost-effectiveness.

 

In addition to the technology and capabilities that you’re looking to buy, it’s also important to evaluate the talent that comes along with it.

 

Clearly a main alteration in the medtech industry is that it’s no longer just about the technology. If innovators want to partner with industry leaders, they must also have a path forward to coverage and reimbursement and offer solutions to the escalating cost of healthcare.

 

If your product or service doesn’t have that, it’s time to go back to the drawing board. If it does, then getting on the radar screen of a “big player” in the medtech space also requires tenacity because timing is everything.

 

If your product or service doesn’t get the acknowledgement you were hoping from a potential partner or buyer, it’s important to stay persistent. In the words of Bill Bradley, Hall of Fame basketball player, “Ambition is the path to success, persistence is the vehicle you arrive in.”

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