Within the medical device industry, mergers and acquisitions (M&A) are part and parcel of the trade as larger companies seek to consolidate by buying smaller entities in a bid to increase their clout. But as businesses become larger, it’s important to ensure processes between the two companies are aligned and harmonized. But how can an M&A proceed as planned without incident? Below are three things to consider that will assist you during your M&A.
Perform Due Diligence
It’s essential when assessing a prospective company that you perform due diligence. This can be performed in-house provided you have internal expertise. If not, be sure to bring on board lawyers, business analysts, as well as financial experts to analyze the company’s strengths and weaknesses. With their knowledge, they can review and audit the quality of the company’s pipeline, any clinical trials they may have in progress, their financial strength, and so forth. What’s more, the due diligence must take into account Quality, Regulatory Affairs, and Information Technology. The financial review in particular is important in determining whether or not the company is the right fit.
Develop an Integration Strategy
This is a crucial step in the process that in large part starts when you perform due diligence. From a strategic standpoint, it’s essential you gather enough data as you prepare to integrate processes. Have in place a strong team led by an experienced team leader with detailed knowledge of the prospective company. Set a definitive budget that accounts for data transfer (among other things), as well as for the array of unforeseen circumstances not identified during due diligence (e.g. recalls, field actions, etc.).
Additionally, the importance of establishing a Quality Management System (QMS) before initiating your integration strategy cannot be emphasized enough. It’s advised that you combine each company’s QMS so that processes are harmonized. This allows both companies to communicate more effectively and be on the same page once the merger has taken place. It’s also beneficial because it means you only have to manage one Notified Body as opposed to two, which would be the case if both QMS’ weren’t merged. It’s also imperative both companies develop a transition plan for the M&A alerting notified bodies of how they plan to proceed.
The Crash Test
Within the medical device space, there are numerous audits and requirements that companies must abide by depending on the market they’re seeking to enter. Should a company fail an audit, it can have wide ranging implications on an organization, such as selling restrictions within a particular country. Such a factor could have a negative impact on an organization’s finances.
Therefore, it’s vital you carry out what’s known as the Crash Test. Running a crash test allows you to simulate a real audit while verifying that your financials are in working order. Such a task means your team has to be well prepared. Ensure they are well versed in how to talk to an auditor as team members may well be asked to answer questions not pertinent to their role or area of expertise.
With M&As, it’s rare that the process is straightforward and goes according to plan. Certain issues and problems may arise that could derail the process altogether. While there’s no full proof guide that will ensure the merger takes place without incident, by considering these three steps, it might the process a little less daunting.
*This article was adapted from The M&A Playbook for Medical Devices