Impact of M&A activity on R&D Productivity & Innovation

Impact of M&A Activity on
R&D Productivity & Innovation

Daniel L. Mooradian, Ph.D.

Chief Scientiﬁc Ofﬁcer

Innova Medical Design LLC

Marcus Evans Medical Device Summit 2012

Colorado Springs, CO

Objectives

•  Mechanics of Deal making

•  Discuss trends in Medical Device M&A

•  Explore the Challenges facing R&D

•  Share my experiences (R&D centric) as a
“survivor” and student of the subject

•  Invite you to share your experiences!

Copyright © 2012 Daniel L. Mooradian. All Rights reserved

Introduction

•  Mergers & Acquisitions are a necessary and
beneﬁcial part of the corporate “life-cycle”

•  Small companies - often the preferred
strategy to create investor value

•  Mid-/Large-Companies - a path to growth
via optimization of new or existing sales
channels


Source: www.ﬁercemedicaldevices.com


Medical Device M&A Trends

•  Strong M&A activity in the Medical Device
and Biotech sector through Q2 of 2012

•  Modest activity Q3-Q4 2012 based on
uncertainty regarding the election
outcome, healthcare reform, etc.

•  Marketplace seems poised for resurgence
in 2013


Medical Device M&A Trends

•  Signiﬁcant capital on the side-lines – even
VCs claim to be eager to invest!

•  Trend in large companies away from
organic R&D

•  Trend in start-ups toward strategic
partnership vs. traditional VC route for
start-ups


The M&A Process

R&D INVOLVEMENT

LOW

LOW-MEDIUM

HIGH

xeon-international.com/services/corporate-ﬁnance/ma/the-ma-process


M&A Challenges

•  Mandatory adoption of cumbersome
processes can strain resources

•  Reorganization - loss of key management,
changes in reporting can impact morale

•  Shift in priorities by OPS, Quality, M&S can
reduce availability to support product
development leading to delay


Pipeline Value/Technology

•  Often an attractive sweetener during due
diligence.

•  The acquired may believe that they will have a
new source of support for innovation

•  Not the Norm. Cost of acquisition (which
comes at the expense of existing businesses)
makes it difﬁcult to double down before the
value of the acquisition itself has been
conﬁrmed!


Strategies to improve
R&D integration


Integration Team

•  Make sure you are represented on the
Integration team

•  Engage your functional counter-part

•  Realize that everyone involved has a “day
job”

•  Seek opportunities for your Senior staff to
participate in key integration activities

•  Make integration a priority


Process Knowledge

•  What is your new Innovations Process?

•  What is your new company’s Budget
Process?

•  Who are the key decision-makers?

•  Are you adequately represented?


The Deal Model

•  Make sure you understand what
constraints have been placed on your
current and future budgets as part of the
acquirers deal model

•  If growth in R&D is not built into the deal
model then it will be very difﬁcult to grow
post-acquisition.


Next Years Budget

•  You new organization is already working
on next years budget!

•  You are already at a disadvantage

•  Learn how budget decisions are
made……

•  And who makes them!


Protect Resources

•  The deal-model will set limits on unit
expenditures post-acquisition

•  If your needs are not reﬂected in the deal-
model then you are at a disadvantage

•  Pressure on OPS/Manufacturing/Quality
(and Clinical) will put existing and future
R&D resources at risk

•  You must ﬁght for position or risk decline


Protect Resources

•  Critical R&D employees who are not
protected by CIC agreements must be
identiﬁed and protected via retention
agreements if possible

•  Protect against ﬂight

•  Promote engagement

•  Reduce uncertainty and anxiety


Preserve Corporate Culture

•  The post-acquisition period is one in which
culture can play a critical role in guiding
behavior in the face of uncertainty

•  Too little emphasis is placed on the
integration/assimilation of culture in
mergers & acquisitions

•  Repeat your core values often to yourself
and others.


Communicate!

Staff

New

Management

Peers

No news is NOT good news!


Thank you!


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