Early and extensive planning for successful exit is critical to achieve the highest return on investment. For medical device and other lifescience innovators, the identification of potential merger and acquisition targets for an exit strategy, in addition to potential companies for strategic alliance are cornerstones of Strategy Inc. Some entities may be seeking complete acquisition of their entire company, while others with diversified portfolios might move to sell select offerings to focus product development.
For the merger and acquisition strategy, potential acquisition targets are identified from competitive medical device companies, as well as those whose product portfolios compliment the lifescience innovation. Target acquirers are also selected based on market presence and performance, as well as history of strategic partnerships and perceived need for expanding their product offerings.
Understanding the current competitive landscape is a component of the Exit Strategy. Knowing what other companies have been acquired in the last three years, and at what revenue multiples, sets the stage for acquisitions in the technology space. In addition, how the technologies have fared since the acquisitions provides insight into the current technology trends and appetite for the innovative space.
An analysis of the top 10 acquiring targets is the first step in the Exit Strategy. This allows a strategic focus on those targets with the highest potential for a most favorable acquisition. For each potential target, critical due diligence is generated to understand the acquisition potential:
- Each company’s revenue (as available)
- Current product portfolio including number of products and product diversity
- Appetite for acquisition based on historic M&A strategy and strategic partnerships, as well as financial motivation based on R&D spending
- Industry multiples and specific premiums that have been paid for technology that extends, or expands product offerings
- Potential private positioning for the technology within their existing portfolios
- Most recent few years’ revenue for the specific divisions
In addition to the obvious targets, recent trends in M&A lean towards strategic partners who may be seeking to diversify their product portfolios into areas that may have a peripheral or indirect alignment.