It's a Seller's Market : Why Strategics and PE Firms are going after the Mid-Market!
If your business is between $5 Million and $250 Million, you are part of the Middle Market. The fact is that if you have a small to medium size business, you make up more than 80% of the world economy.
Looking closely at the MedTech industry, the numbers are quite impressive: The top 10 companies make up for 37% of the industry with another 30 companies growing fast and catching up
The world of Mergers and Acquisitions has been quite active in MedTech. We have watched giants swallow other giants (i.e. Medtronic and Covidien). And other industry giants who were not in healthcare (I.e. Apple and Google) have now entered the field. In the meantime, Venture Capital Firms have re-assessed their strategic investments. While they continue to invest, they do so more cautiously for MedTech than in the past.
At the “Device Talks” meeting last week in Boston Massachusetts, start-up businesses were discussing ways to get financing and it became clear that the dollars are limited compared to the number of companies seeking funding. It’s frustrating for those emerging technology companies as they continue to hear statements (including in this newsletter) that “there is more capital available than ever before.” (Note: we will talk about this in an upcoming newsletter.) However, if you have an established, profitable business, then you are in demand more than ever before!
Big companies have money to spend and innovation does not come fast in large companies. If your product fits their strategy then you will be very attractive. If you have even a small EBIDTA and a solid business, PE firms are looking for you.
So, who are the big “Strategics” in MedDevice and MedTech? At the top of the list, you’ll find Medtronic, Johnson & Johnson, Siemens, Philips, and Roche.
(We will address BioMed, BioTech and Lifesciences in the future.)
Is what you have of interest to them?
Growth is going to continue thru-out the industry, and in some of the categories, it will be impressive. Looking ahead to the year 2022, analysis indicates that significant market share and sales growth is anticipated in areas of cardiology, in vitro diagnostics, and endoscopy.
What does this mean for you? You have VALUE and you should capitalize on it.
There are many ways to do that. No two deals are the same and, in the end, YOU should know what you want for your business. What is best for you? Selling to a Strategic or working with a PE Firm? It depends on your value.
We have stated before that “Value = Strategic Fit + Timing”. If you are a MedTech company and you are profitable (Strategic Fit), you have VALUE. P.E. firms need to spend their funds and there are more funds seeking good acquisitions which makes the timing great!
Big companies are busy and although they may know of you, there is a big difference between them knowing you and them acquiring you. For them, you are a needle in the haystack. They are busy and they come across a lot of great companies and great technologies. Big companies take their time and you need to be persistent and patient. It is a full-time job even when they like your business.
PE Firms have a process as well and, unlike big companies, they do move fast. They have a set process and you have to be ready for all that is coming your way.
Next, how should structure a deal? How do you get the highest value for your business? You have worked hard to build it, you should be rewarded for it. Keep in mind selling your company will take between six months and 24 months (with 12 to 18 months being the average).
So what do you think? What ideas come to mind when you read this article? We consider this an ongoing conversation, and would love to hear your thoughts! We invite you to comment below or, if you’d like to talk about this in person, meet up with us at MPO! Reach out Dave Sheppard at dave.sheppard@medworldadvisors.com or +1-978-684-2712. He will glad to hear from you!
The MedWorld Advisors Team
