M&As: Maximizing the Partnership Process on Both Sides

By Leslie Storms, Kristine Ilaria, Martha Shadan
September 20, 2022


• Categories: 02-MedTech Economics, 04-Product Design & Development, Business Analysis, Capitalization & Funding

At the MedExecWomen meeting on June 14, 2022, Leslie Storms, U.S. president of Ethicon, a J&J Division, moderated the panel “Making Acquisition Strategy Succeed: Perspectives From Both Sides Of The Deal” and brought M&A experts Martha Shadan, developer of a novel tissue regeneration technology for shoulder rotator cuff repair, and Kristine Ilaria, vice president of Corporate Development at Smith+Nephew, to discuss lessons learned. This article reflects the insights shared during the panel.

Mergers and acquisitions (M&As) are a major part of growth strategy for the medtech industry. We’ve observed and experienced a particular strategy and mixture of tactics that accomplish M&A compatibility that is based on strong relationship fundamentals: trust, communication and “a match.”

Both larger and smaller companies may consider M&A for a number of reasons, including filling gaps in their portfolio and moving into higher growth adjacencies. It is important to remember that M&As are a partnership, and both sides of the partnership have certain fundamentals they seek to create the best synergy before and after a prospective acquisition or deal.

Here are a few thoughts to help you develop a lasting, complementary and successful partnership, whether you are a company looking to acquire or be acquired.

The M&A Process Is Like Dating, So Hold True to Strong Values

Successful partnerships require a foundation of trust and excellent communication from the beginning. As with any relationship, there is a matchmaking component to the initial engagements in M&A, and then more serious steps to be taken before the final decision is made to merge.

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For smaller companies seeking acquisition by a larger company, here are a few strategies that may position you to be an effective match for a strategic partner.

Lean into the power of relationships. It often takes years for an M&A to materialize between two companies, which means there are many communications and touchpoints with potential strategics before the transaction. Deals are long in the making before they close.

Be mindful and thoughtful of all communication every step of the way. If it’s not a transaction tomorrow, it may be a transaction two years from now, so it’s best to develop that open and solid communication from the beginning.

Craft an essential story. Take time to gain insight into the important and essential criteria to share with strategic partners. The four fundamentals for an “entry fee” include the following and should be articulated:

• Does your technology meet an unmet medical need?
• Do you have compelling clinical evidence?
• How effective is your commercial assessment and go-to market strategy?
• Can you leverage the strategic’s organization to build synergy?

Be authentic and credible. Data are very important to the strategics of M&A. For example, if your organization is growing, is it growing by users and utilization? Are you gathering more users and continued use from current users? What is your user feedback?

It is important to ensure you’re acquiring new users and growing existing users with increased utilization. Be upfront with potential acquirers about these findings. If your data leans the other way (i.e., new users, but decreased utilization), you should not hide that data point as that will result in a loss of credibility and trust.

Authenticity is essential because it’s how you tie your sources of truth back to your story. If you have M&A in mind as a future goal as you’re building your company, keep that mindset in strategic planning conversations. This will enable proper data design and propel ruthless execution.

Be generous with communication. As you’re getting to know a strategic, keep them apprised of what your organization is doing, your development milestones and your successes. It is essential to be honest about challenges in development and how your organization is addressing those challenges. This approach will enable the strategic to build trust in your company and find you to be accountable. You always want to show the strategics that you’re doing what you said you would do.

Be clear on the match. As a small company that wants to partner with a large company, you should have clear criteria. For example:

• Is this a strategic decision, such as an investment or area of growth?
• How are the relationships forming to enable a partnership “playbook” that will maximize the value for both companies?
• Do you know when to “cut bait” or continue nurturing the conversation?

It is not easy to build a company and take it to the point of growth and success that warrants M&A consideration, and it takes significant time to get that point. But, if you stay fastidiously focused on critical strategies that build value, execute well and communicate with the strategics consistently along the way, smaller medtech companies will do well during this complex process.

From Match to Maximizing the Transition

Before a deal is complete, an integration strategy needs to be designed to maximize the experience for all involved. There is much at stake and to be merged, including people, processes and technology. You need to have guiding principles. This will aid both teams in decision making post-merger, protect those key value drivers that tie back to the deal structure and help to minimize potential risk. Both companies should be clear and candid about the future state and the sooner that is defined, the easier the transition will be for both sides.

Keep in mind that if the above relationship framework is established, it will be easier to align on the future state and step into the post-acquisition phase because there will be a base of strong communication, trust and a cultural fit.

Integration leaders, regardless of company size, must be mindful of the following so the integration is less overwhelming, particularly for the smaller company:

• Establish an integration team and a playbook that identifies roles, tasks, clear responsibilities and event timelines
• Find the right balance of setting direction and expectations for integration success while allowing the integration team the ability to make decisions on execution
• Be mindful and inclusive of all employees and their experiences
• Identify and gather the right resources

M&A transactions start with relationships, so it’s important to share and understand the fundamentals in assessing, building and nurturing the right relationship throughout the entire engagement. Medtech M&A is a part of our industry ecosystem. Our focus during the panel at the MedExecWomen annual meeting was to help improve the potential for successful M&A and strategic partnerships by sharing our experiences on how to align on the right path from the very beginning so the experience on both sides is maximized.