The life sciences industry is among the most active sectors for mergers and acquisitions (M&A) in recent years, especially the medical device sector. In 2017, the top ten biggest M&A medical device deals came with a combined price tag of over $65 billion.
As 2017 draws to a close, the volume of deals is down but the value is up. In 2016, 317 M&A deals totaled $46 billion. By contrast, the 210 deals that were closed by early December 2017 were valued at $62.5 billion.
Some of the most notable mergers were Abbott acquiring St. Jude Medical for $25 billion, Becton Dickinson buying C. R. Bard for $24 billion, and Cardinal Health purchasing part of Medtronic’s patient monitoring and recovery business for $6.1 billion.
The purchase of St. Jude Medical will allow Abbott to cover “nearly every age” of the cardiovascular market. Becton Dickinson plans to form a new interventional business for its Bard assets. And Cardinal Health, having acquired Medtronic’s patient care, deep vein thrombosis and nutritional insufficiency businesses, will further expand the scope of their product line for the operating room, long-term care facilities and home healthcare.
Other promising mergers include Johnson & Johnson purchasing Abbott Medical Optics for $4.3 billion, and Teleflex acquiring Vascular Solutions for $1 billion. With Abbott Medical Optics, Johnson & Johnson is set to become a world leader in eye health. Also, the addition of Vascular Solutions will bring more than 90 coronary and peripheral devices to the Teleflex portfolio.
Trends in M&A
Industry experts have noted that M&A activity in the medical device industry has changed in recent years. M&A deals in the past were not always strategic, but rather an attempt to enter a new area that was growing and showing potential. Now, however, companies are seeking to offer the most complete solution possible in their disease or specialty area. Rather than just looking to acquire more products, regardless of whether or not they relate to the company’s current activity, companies are now focusing on the new opportunities that arise from joining forces with others who have similar activity and complementary product lines.
This logic can be seen in the merging of Becton Dickinson’s catheters and syringes with CareFusion’s infusion pumps, and St. Jude buying CardioMEMS to use novel technology to prevent heart failure patients from going to the emergency room (ER). The implantable device collects information that can be monitored remotely, allowing a patient’s doctor to intervene in a timely manner to prevent serious health situations and expensive ER visits. And when Medtronic acquired the Dutch clinic and diabetes research center Diabeter, it cemented its presence in the specialty area of diabetes.
Benefits of M&A
When it comes to mergers and acquisitions in the medical device field, there are two types of deals: large companies acquiring their peers, and large companies acquiring small companies.
In recent years, when a large company eyes a small one, it’s typically either a strategic “add-on” or a startup with innovative technology the larger company wants to add to its portfolio, even if the technology has yet to be proven effective.
Mergers are often win-win situations for both companies involved. The small company is boosted by the larger company’s marketing reach, name recognition and research budget. And the large company is able to quickly enhance or diversify an existing product line, or create inroads into a new, complementary specialty.
Challenges
While the benefits can be significant, purchasing a small company can come with surprises and unexpected headaches at the same time. When buying a small company, the large company may discover important gaps in regulatory compliance that need to be corrected. Small companies might not carry out everything as they should, for the simple reason that they lack resources, budget and expertise, and don’t have sufficient processes in place.
Systems integration is essential. Aligning regulatory and quality systems to make them compliant with international regulations can majorly impact integration and the ability to keep products on the market.
Another challenge to prepare for in mergers between large and small companies is the difference in marketing materials. The large company will likely plan to distribute the newly acquired product lines in their current markets worldwide, while the small company may only have marketing materials prepared in a few languages.
And throughout all this, as is often the case in the business world, time is of the essence. The newly merged company should seek to integrate as smoothly as possible, to ensure a properly functioning supply chain as quickly as possible. Those inside the company as well as investors and the public will be reassured to see business continuity, along with the fostering of new synergies and value.
Translation is more important than ever
Companies need to wade through thousands of documents during a merger or acquisition, which will have a direct impact on the M&A, acquisition price or even if the merger will continue. Many times, those documents can be in varying languages, where other nonspeakers of that language need to perform their due diligence. Players on both sides need to ensure their asset and liability exposure analysis is airtight. Time is paramount to ensure documents are translated and completely vetted, such as:
•Acquisition agreements
•Closing documents
•Company policies
•Financials
•Human resources documents
•Intellectual property files, such as patents, trade secrets and trademarks
•IT infrastructure information
•Legal papers
•Operations information
•Product development
Without the ability to understand content from all global entities, M&A activity would be minimized, if not cease to exist. The proficiency to translate quickly and accurately has without a doubt helped fuel the global M&A activity we have seen in recent years.
Confidentiality
During the entire translation process, the language service provider must guarantee not only high-quality work but also utmost confidentiality. One way this confidentiality can be guaranteed is through software, such as translation management software and virtual data rooms. By securely hosting due diligence documents online for M&A transactions, virtual data rooms can accelerate the M&A process and grant access to the maximum number of potential buyers, saving valuable time and significant money for international transactions.
Partnering for success
Medical device M&A is subject to a variety of legal issues and regulatory regimes that are distinct from those in other industries. To successfully navigate all the potential pitfalls, companies should rely on a language service provider with both the experience and the technology to collaborate with the many stakeholders involved during the deal. These stakeholders include everything from law firms and corporate buyers and sellers to private equity firms, and financial and technology-assisted review companies. As the transactions unfold in a complex multilingual process, it’s critical to partner with a language service provider that has expertise in both medical devices and finance to properly address the language needs that arise every step of the way.
